Millions of dollars are flowing from America's corporate executives into the campaign coffers of George W. Bush. It seems logical that business executives - whose taxes he cut significantly - should support him. But a glance at the Bush administration's foreign policy - including on Iraq and world trade - reveals that the president's actions could significantly harm the interests of US investors.
The war in Iraq is harming the American economy. The US has already wasted about $200bn (£112bn) in a futile effort to turn Iraq into a liberal democracy and Mr Bush is now asking for a further $25bn. Until US troops leave, it is likely that US taxpayers will have to contribute hundreds of billions of dollars more to this ill-fated enterprise. Mr Bush's pledge to establish "democracy" in Iraq is essentially a commitment to keeping large numbers of troops there - potentially for a decade - with little hope of success.
Mr Bush's Iraq war stands in contrast with his father's. The war to liberate Kuwait was justified and the elder Bush, who understood diplomacy, convinced the allies to shoulder almost the entire financial burden of the conflict. His son, however, initiated the war for dubious reasons and thus secured almost no substantial contributors in 2003-04. Even nations that sided with the US, such as Japan, contributed far less funding this time than in 1990-91.
Moreover, Mr Bush is putting at risk the international system which underpins world stability and US corporate profits. America leads a system that upholds the peace of Europe and the Pacific Rim - where most of the world's wealth outside the US is generated - and helps mitigate political and financial crises throughout the world. This system, anchored by Nato and alliances with Japan and Korea, relies on US military power. But it also includes economic organisations such as the World Trade Organisation and the International Monetary Fund. These institutions need both American hegemony and the co-operation of US allies to work well. The unilateral use of American power for a misguided purpose has crippled, though not yet destroyed, this system. Friction between Washington and Paris over Iraq generated much attention, but the real failure was the diplomatic crisis over ties with Germany.
The diplomatic aspect of the war also hurts American business. International trade and investment flourish because the US leads regional and global institutions that protect the world from anarchy. Though the US is incredibly powerful, it cannot ignore its allies if the system is to work well. Mr Bush behaves like a managing partner who thinks that, as the largest shareholder, he can act as he pleases without considering his junior partners. At some point, this attitude could shatter the international order, with dire consequences for the stability companies need to make profits.
Trade policies have also taken a battering under Mr Bush. His tariffs on steel undermined the WTO and hurt the profitability of steel-buying companies. Though later rescinded, the tariffs set a dangerous precedent. As US president, Mr Bush's actions have generally had far more impact than those of any other single leader.
In Europe, the Bush administration's commitment to reducing US military presence in Germany could fray the ties between the US and some of its most important economic partners. There cannot be a lasting transatlantic partnership without a robust US military presence in western Europe.
Finally, America's new visa policies harm US industry. US companies are now encountering difficulty bringing foreign employees to the US, while overseas customers in some countries cannot visit their American suppliers. Other new restrictions would prevent some of the brightest foreign students from studying in US universities - and possibly contributing to American expertise. If the Microsofts, Intels and Googles of this world cannot count on a continuing inflow of foreign graduates and face restrictions in hiring foreigners, their profits are likely to fall substantially.
Right now, Mr Bush is trying to limit the damage from the escalating controversy over US military abuse of Iraqi prisoners. But this and other grim developments are hurting the alliances, relationships and economic strength that US corporations rely on to succeed. American executives, therefore, need to ask themselves if Mr Bush's re-election is in the best interests of their shareholders.
* The article was reprinted from Financial Times on April 5, 2004. No reproduction or republication without written permission of the author and the Financial Times.
May 10, 2004 Financial Times
