The Case for American Isolationism
Author: Greg Valliere
May 10, 2019
POLITICIANS PROMISE FUTURE SUCCESS, it’s in their DNA, but they now face an issue that has been complicated by their boasts — the role of America in the world. Reality sunk in this week: global hot spots can be contained but not resolved. Consider:
A TRADE DEAL WITH CHINA is possible, eventually, but meaningful structural Chinese reform seems unlikely; Beijing will continue to cheat. Boasts that the U.S. could change China always seemed unrealistic. Sanctions rarely work; yes, tariffs will hurt China’s manufacturing sector, but the victims will become even angrier and less willing compromise.
VENEZUELA: National Security adviser John Bolton, an uber-hawk, has called for the ouster of the dictator Maduro. Even Donald Trump has chided Bolton for being too aggressive, backing the U.S. into a corner. There are too many Cubans and Russians in Venezuela to launch a U.S.-backed insurgency, so it increasingly appears that the U.S. bluster was hollow.
IRAN: The ayatollahs and the Revolutionary Guards run Iran with an iron fist; only hard-liners are allowed to compete in elections. The goal of regime change in Tehran is ridiculous, unless the U.S. is prepared to lose thousands of troops and trillions of dollars — and the American public is very sick of war in the Mideast.
NORTH KOREA: The bloom if off the rose in the odd bromance between Trump and Kim Jung-un. The U.S. goal of a de-denuclearized North Korea is not attainable, so why even demand it? Kim needs a deal, which a deft American negotiator could achieve, but we’re not optimistic. Even if there was a deal, the North Koreans undoubtedly would cheat.
THE PROBLEM, IN OUR OPINION, is that expectations are consistently too high; it’s one thing to manage expectations but another thing to meet or exceed them. Regime change is not going to occur in Iran or North Korea or, sadly, Venezuela. Boasts by Bolton that regime change is possible cannot be backed up by force; Trump, who leans toward isolationism, said as much this week.
THE U.S. HAS SUCH MILITARY MIGHT that an overt attack on American interests is highly unlikely; a $700 billion defense budget buys protection. But the idea of changing hostile regimes is not popular with voters — or Trump, who gets it.
WE PREDICT A RISING MOOD OF ISOLATIONISM, a backlash against the Lindsey Grahams and the Joe Bidens, who always seem to favor U.S. intervention. An isolationist mood has been popular in the country for decades, especially in Middle America, which has borne a disproportionate share of casualties, from Vietnam to Iraq.
SO WHY SET EXPECTATIONS SO HIGH? The U.S. cannot impose its will on the world without incurring enormous losses; any effort to change the regime in Iran would be a disaster. The answer, it seems, is for the politicians to tone down the bombast and accept the reality of an uneasy coexistence with the world’s despots — because the alternative is unacceptable.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
©2021 AGF Management Limited. All rights reserved.
