Is NATO Liberalization the Golden Goose for US Financial Woes?

Presidents Barack Obama and Donald Trump obviously differ in numerous ways; however, one area where they seem to strike the same tone is on the relationship between the United States and NATO. In a 2016 speech in Brussels, President Obama stated: “Europe has been complacent about its own defense,” in addition to calling European nations who called for US military action in North Africa “free riders.” President Trump has gone even farther, referring to NATO as “obsolete” and accusing NATO nations of “ripping off” the United States by failing to meet funding commitments. Bipartisan agreement is increasingly rare in the United States – so are Presidents Trump and Obama correct that the United States should be rethinking its status within NATO should its counterparts on the other side of the Atlantic refuse to spend an adequate amount on their own defense?

I would argue that the United States should in fact be rethinking its contemporary relationship with NATO, but not in the way that Presidents Obama and Trump propose. The United States is in a precarious financial position at the moment, sitting on top of a $20 Trillion mountain of debt that cannot be dealt with unless extraordinary action is taken. Yet the answer to this problem may be a simple one: liberalization. A reworking of the relationship between the United States and NATO could be used to establish what Niall Ferguson refers to in his book “Colossus” as a liberal empire: “one that not only underwrites the free international exchange of commodities, labor and capital but also creates and upholds the conditions without which markets cannot function – peace and order, the rule of law, non-corrupt administration, stable fiscal and monetary policies.” The integration of NATO into a voluntary free trade zone modeled after this statement could be the catalyst sparking the long-awaited growth that the United States needs to right the ship economically.

Removing some of these barriers within the United States and NATO countries would help both areas to foster innovative entrepreneurship and promote economic growth. There is a wealth of potential new world-changing innovative technology that is not being transferred into economic growth because of protectionism and rent-seeking behavior. Allowing the free flow of capital and labor across such a vast area would help to unlock some of this potential by allowing resources, both human and financial, to flow towards their most productive outlet.

For example, setting up a Schengen-zone style free travel agreement among NATO members could allow talent that is attempting to set up a Silicon Valley-style hub in Bratislava or Stockholm to flow into to Silicon Valley itself and take advantage of the existing infrastructure. Entrepreneurs in the United States could more easily set up a business in e-Estonia or in Liberstad, a private city in Norway with a long-term plan to emerge as a “European Hong Kong,” where they wouldn’t have to deal with burdensome regulations in order to set up simple businesses.

Presidents Trump and Obama level economic claims against other NATO members while ignoring the obvious solution of liberalization. The United States spends well over 3% of its GDP on military expenditures, and only two other nations – Poland and Estonia – hit the required NATO benchmark of 2% of GDP on military expenditures in 2016. Reducing this parity by getting European NATO members to spend more on defense does not seem likely, therefore the course of action the United States must take is to reduce its spending. However, scaling back military spending in the United States is a gargantuan task: In the popular discourse, changing an increase of 2%  to an increase of 1.5% in the annual budget is disingenuously referred to as a “cut,” making it functionally impossible for an actual spending cut to take place.

Approaching this problem from a different perspective yields a strategy that can see results: increasing GDP faster than the increases in the rate of military spending naturally leads to the percentage of GDP spent on military expenditures declining, successfully reducing the spending parity between the United States and its NATO allies. In other words, unleashing a wave of innovative entrepreneurship and growing the economy through liberalization on an international scale will also relax the pressure of carrying the majority of the military spending burden throughout the NATO region.

 

References

1. Ferguson, Niall. Colossus: the rise and fall of the American empire. New York: Penguin, 2009.

2. Holehouse, Matthew. “Obama tells ‘complacent’ Europe to hike military spending.” The Telegraph. Telegraph Media Group, 25 Apr. 2016. Web. 08 May 2017.

3. Diamond, Jeremy, and Eugene Scott. “Trump on potential war between Japan and North Korea: ‘If they do, they do'” CNN. Cable News Network, 02 Apr. 2016. Web. 08 May 2017.

4. Angres, Leigh, and Maureen Costantino. “The Federal Budget in 2016: An Infographic.” Congressional Budget Office. Congressional Budget Office, 08 Feb. 2017.

5. Liberstad. (n.d.). Retrieved July 02, 2017, from http://www.liberstad.com/

6. “Home – e-Estonia.” Retrieved July 02, 2017, from https://e-estonia.com/

7. http://www.usdebtclock.org/

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