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Finding a Place in a Rebalanced Global Economy: the New Foreign Policy Challenge

More years ago than I care to admit, when I was a growing up in northern Alberta, my farmer father had a trick to wake up my late-sleeping maternal uncle for his summer job on our family farm. “Bohdane, Bohdane,” my dad would cry. “You have to get up. There is a revolution in the Soviet Union! It started among the Muslims in central Asia! And now it has spread to Moscow and the streets of Kyiv!” Bohdan, raised in the intensely political post-World War Two Ukrainian-Canadian émigré community, would spring out of bed and turn on the radio and TV. In addition to being a great way to get my teenage uncle out of bed and on to the tractor, what made my father’s technique seem so funny at the time was how it highlighted our close-knit tribe’s certainty that the Soviet Union would collapse.

As a Ukrainian kid growing up in Alberta in the 80s, and going to Ukrainian school on Saturdays, the only person to whom that future didn’t seem self-evident was my father -- an Anglo-Scottish son of the prairies. Then I went to Harvard, and learned that some of the world’s smartest analysts of the USSR -- my professors -- also thought that my grandparents and their friends were crazy, and that the Soviet Union wasn’t going to fall apart any time soon.

That expert reluctance to think that the dominant paradigm could change reached its apogee for Soviet Ukraine in August, 1991, when the first President George Bush travelled to Kyiv and told Ukrainian parliamentarians they should stick with the USSR. Later that month, Politburo hardliners staged a failed coup. Ukraine’s leaders responded by declaring independence. The experts, including the CIA and a president steeped in foreign policy, turned out to be wrong and my émigré grandparents, who arrived in this country in middle age and spoke English with a heavy accent, turned out to be right.

I was a rookie reporter -- in fact, a stringer, which in the view of many staff correspondents in those days was even lower on the food chain than that -- in Kyiv by then, and I witnessed the humbling of the experts and the vindication of my grandparents firsthand. Since, in my native-born Canadian hubris, I had aligned myself with the western experts and been embarrassed by what I took to be the naïveté of my unsophisticated grandparents and their peers (they could barely speak English, after all!), that experience delivered a powerful personal, as well as intellectual, punch.

This year, North Africa has offered the same vivid lesson in how hard it is for the expert establishment to predict -- and then adapt to -- regime change. Consider the IMF’s April, 2010 report on Egypt, which praised the country’s “sustained and wide-ranging reforms since 2004”, noting they had made the economy more durable and less vulnerable to external shocks. Ditto the CIA, whose director, Leon Panetta, endured the very personal ignominy of seeing his public predictions to Congress proven wrong within hours of making them. Wall Street titans and British grandees made the same mistake: when Saif Ghaddafi came to New York a couple of years ago to explore investments for Libya’s sovereign wealth fund, I dined with him twice in 72 hours, once overlooking Central Park West, and two days later at New York’s most prestigious address, 740 Park Avenue. The LSE’s Howard Davies wasn’t the only one wrong-footed by the Libyan uprising.

For anyone who covered the 2008 financial crisis this failure of the experts is very familiar. There seems to be something about massive paradigm shifts -- whether they are the bursting of a financial bubble that has been years in the making, or a popular revolt against a political regime that had been stable for decades -- that we human beings find hard to deal with.

I have been thinking about how hard paradigm shifts are, especially for the professionals, because I believe the biggest -- and as yet incomplete -- job of foreign policy today is to reorient itself to a post 2008 -- and, I will argue, post-1989 -- world.

The starting point for that new paradigm must be to put the economy at the heart of foreign policy. Some of America’s savviest wise men are already making that point, most notably in the November/December issue of Foreign Affairs, with two seminal essays on the importance of the economy for statecraft. But these pieces, which argued that America’s troubled fiscal position is a major constraint on its ability to act in the world, and that growing GDP should be a central goal of US foreign policy, are just a start. Foreign policy, and this is as true of Canada as it is of the United States, needs to be reframed from the bottom up, and built around both national and international economic issues.

It is time for a new foreign policy paradigm not just because western countries -- especially the United States, still the world’s hyper-power -- are running out of the money and the appetite to police the rest of the world, but also because national security and international relations -- the classic concerns of diplomacy -- are now largely driven by economic concerns.

For much of the last century, the Cold War determined the framework for international relations. Containing Communism, and ultimately helping to defeat it, were, rightly, the defining goals of west’s engagement with the rest of the world. In the triumphal aftermath of the end of the Cold War, the tempting and obvious next step for many western countries was to shape foreign policy around an agenda of bringing democracy or free markets or some combination of all three to the rest of the world.

For many in the western alliance -- most notably President George W. Bush and Tony Blair, although not Jean Chretien -- the reaction to the 9/11 attacks was to add teeth and a more traditional national security justification to that campaign: in an echo of the Cold War, the battle against Islamic extremists, both those who ruled states and those who did not, emerged as the defining purpose of western foreign policy. Nearly a decade later, the threat posed by what some described as “Islamo-fascism” seems less all-encompassing, and the responses -- wars in Iraq and Afghanistan -- imperfect, even in the view of many of their supporters.

Meanwhile, a new defining international issue -- for America and for everyone else -- has emerged: how to organise the world economy. This has been a rising concern since the collapse of communism and the subsequent adoption of some version of capitalism by almost all of the world (pace North Korea, Cuba and Zimbabwe). But it was the meltdown of 2008 which moved the global economy from Wall Street and Bay Street to foreign ministries around the world. The financial crisis showed us all that globalisation is not only an engine for international economic growth, but a source of grave, and international, risks. Healing the global economy is now the world’s most urgent priority -- and it is a job which can’t be done only at the national level.

Nuclear weapons -- both their deployment and treaties limiting it -- were the dominant concern of the Cold War era. Fighting actual wars was the dominant concern of the post-9/11 era. Today, the most important mission of foreign ministers and heads of state is figuring out how to rebalance the world economy and to fight the protectionist impulses which are an inevitable reaction to recession.

Here's what makes that effort so vital -- and so difficult. The revolutions in Eastern Europe and the former Soviet Union that I reported on twenty years ago didn't just oust particular political regimes, they were the defeat of an idea about how economies and economic blocs should be organised. Nowadays we are all capitalists and global traders of some stripe or other -- and that is true not just of the former Warsaw Pact and its client states, but also of China, which crushed its own 1989 uprising, and of India, which never adopted the political restrictions of orthodox Communism, but was once pretty gung-ho about central planning, state ownership and trade barriers.

But global capitalism is a very broad church. That's great if you believe in heterogeneity and pluralism and experimentation -- which I do. But as more and more of everyone's economy goes global, not having an agreed set of rules -- let alone designated umpires -- makes it hard to keep the game going. As Ron Bloom, assistant to President Barack Obama for manufacturing policy, said of China at a recent seminar I attended in Washington, they are playing one game, and we are playing a different one. Bloom took care to insist that America's rules weren't necessarily better than China's -- post 2008, that kind of humility isn't as rare in DC as it used to be! -- but that doesn't detract from his point, which gets to the heart of why we need a geo-economic approach to foreign policy and why it will be so hard to figure out.

Figuring out a framework for the world economy isn’t a novel challenge, of course. That’s what the Bretton Woods system, for example, or the Plaza Accord, were about. The European Union started with an economic pact, the European Coal and Steel community, and remains at its heart a structure for allowing Europe’s economies to work together. But what is new today is that virtually every country in the world is in some ways capitalist, a coming together which ironically complicates efforts to create global governance structures. Not only are there more and more varied players at the table, but, in contrast with Bretton Woods, the ability of a single super-power to set the rules is much diminished.

The stakes are high. The 2008 financial crisis is the most recent example of what can happen when the global economy gets out of balance and the rules of international finance don’t work. For some of the countries in the industrialised west on the wrong side of those global capital flows, the domestic consequences were more devastating than any world event since the Second World War. The upside is important, too. Devising an effective international economic order, and achieving our country’s best possible place in it, is surely the best route to national prosperity. And it is also a powerful way to satisfy a more traditional national security agenda -- if the global economy is working, we will have less reason to go to war with each other.

Developing a foreign policy paradigm focused on the global economy is a huge project -- and one far beyond the scope of tonight's talk. But what I think I can do is sketch out the three big areas economically-focused foreign policy needs to deal with; identify two cross-currents that will complicate the effort; and finally talk about three important issues that don't fit into a geo-economic approach. So, first, the three big questions that what we might call a geo-economic approach to foreign policy needs to address.

1)      The Movement of Money

Global capital flows used to be the province of geeky accountants and plutocratic hedge fund chiefs. They intruded into the loftier realm of foreign policy only in countries that were so poor and so weak they could be knocked off course by inflows and outflows of foreign money, or by a judgement by the mandarins at the IMF. In this respect, the crisis of 2008 was a great equaliser: rich countries discovered that they were no longer immune to contagion from international financial viruses -- just look at Ireland or Iceland. Even here in the land of virtuous bankers and omniscient regulators -- are they our new Mounties? -- the global crisis packed a powerful and unpleasant punch.

Managing the movement of money in a global and digital economy is, of course, a huge issue. For me, it is helpful to break it down into two categories -- the government's money and private money.

If you are still unconvinced by my argument that geo-economics needs to become a central concern of foreign policy, reflecting on the political and diplomatic consequences of what states do with their own money may persuade you. Consider -- two of the most contentious issues in international relations over the past year (at least before the Jasmine Revolution) were China's exchange rate and the US central bank's policy of quantitative easing. These days China's exchange rate policy has such a profound impact far beyond the Middle Kingdom that that other sometimes hermetic and self-absorbed land -- Middle America -- seized on the issue as a defining topic in the 2010 mid-terms.

As for the international reverberations of QE2, recall the accusation from Guido Mantega, the Brazilian finance minister, that the mild Ben Bernanke had fired the first shot in a global "currency war" because of his aggressive quantitative easing.

Exchange rates and interest rates are national governments' (and supra-national ones, in the case of the eurozone) biggest levers to control their own money and the flow of money through the global economy. For countries lucky enough or disciplined enough to amass them, central bank foreign currency and commodity reserves and sovereign wealth funds are another.

Of course, governments don't control just their own money -- they also tax and regulate the movement of private money. Financial regulation, including how financial institutions and their workers and owners are taxed, is the main way governments do this. Capital controls -- once unmentionable in enlightened western economic circles, but now sometimes sanctioned even by the high priests at the IMF -- are another. When I interviewed him on Monday, John Lipsky, the first deputy MD of the IMF, and a former vice-chairman of JPMorgan, told me, “There could be cases in which temporary controls might be necessary and useful.”

The 2008 financial crisis is, of course, the obvious illustration of the global impact of the ways that governments control private money, often far beyond their own borders -- think of the international ripple effect of America's lax mortgage regulation or the flood of Chinese government money into the US. National decisions have global consequences at a more subtle level, too. One of the drivers of the 2008 crisis was a regulatory race to the bottom, as New York and London competed to be the world's financial capital, a contest everyone from McKinsey to the FT insisted would be won by the jurisdiction with the most delicate mastery of 'light touch' regulation. (It is more than ironic to note that today, one of the most promising contenders for that crown ten or twenty years hence is Shanghai, an entrepot whose many virtues do not include a government disinclined to meddle in the economy.) A similar dynamic is already influencing the debate about regulation of derivatives trading and hedge funds and taxation of financial institutions and the traders and bankers who work there.

2)      The Movement of Goods

This is a more familiar foreign policy concern -- and one explored by generations of economists, regulated by extensive national laws and international treaties and managed by powerful global institutions like the WTO. But the twenty-first century has added three important new twists which a geo-economic approach to foreign policy needs to consider: the power of export-led growth, the importance of ideas in international trade and the voracious appetite for commodities as the world's poor prosper.

I like to call the challenge of export-led growth the "there are no Martians" problem, a clever phrase coined by my friend, the always brilliant and always quotable Larry Summers. The point is this -- one of the lessons of the past decade or so has been that export-led growth is a winning national strategy. It creates jobs at home and enhances a country's power abroad, thanks to the spending power of a trade-surplus nation's sovereign wealth fund and the investment decisions of its reserve-rich central bank. But, while export-led growth can be a terrific strategy for individual countries, it can't work if every nation tries it at the same time. That’s because, as Larry put it, there are no Martians to consume the trade surplus of a planet Earth that collectively operated on these principles.

For the first part of this millennium, no one worried about this inconsistency too much, thanks to the voracity of the US consumer, and her access to cheap credit. For the rest of the world, America was Mars, and the global economy worked.

That ended with the 2008 financial crisis. Not only has the American consumer's access to credit become more constrained, but he may have lost his job or fear that he might. Suddenly, the mainstream US media is running stories like the segment on ABC last week in which a reporter emptied a family's home of all goods that weren't made in the USA: the only things left were a vase and, literally, the kitchen sink. The ABC report stopped short of calling for import barriers -- but it did urge Americans to adopt a personal, and modest, version of protectionism, by devoting $64 of the annual family budget to US-manufactured products.

At the level of geo-economics, the 'no Martians' problem hasn't -- at least not yet -- translated into a significant protectionist drive, a surprising and, for free-traders like me, reassuring fact, especially given the Smoot-Hawley experience of the Great Depression. But it has led to significant and overt pressure on the most powerful practitioner of export-led growth -- China -- to stimulate domestic demand. That points to one of the complicating implications of geo-economics: nowadays, our neighbours believe they have a legitimate interest not just in where we position our nuclear weapons or what we do along our borders, but in how we run our domestic economies.

The second twist is the importance of ideas -- and goods based on ideas -- in global commerce. Trade in these products -- everything from a Blackberry, to word-processing software, to ads on a Google search page -- is an intensely political business. It depends on robust intellectual property laws, which can pit domestic boot-leggers against foreign sellers . Many of these products have the power to undermine authoritarian regimes, but they can also be co-opted by dictators as tools to control their people. An important question for geo-economics is the extent to which we should be trying to devise international rules -- and rights -- governing the trade in ideas. And to what extent should diplomats be backing their countries' businesses when disputes arise?

Of course, these ideas-based products aren't unique in being both the subject of international trade and of national security -- high-tech manufactured goods, like jet engines, raise a similar set of concerns. What makes the ideas-based goods a politically more complicated issue to negotiate is what an HP executive described to me as "the consumerisation" of technology. A Boeing or a Bombardier contract is important to that company's workers, executives and shareholders -- but there is a much wider public interest in being able to use our favourite PDA or search engine.

The final issue geo-economics needs to consider is the rising value and strategic power of commodities. We like to think of this as being the era of virtual goods and of the creative class. But we are also living in a time when hundreds of millions of the world's poorest people are climbing into the middle class, and eating meat, owning several sets of clothes and buying energy-hungry consumer goods as a result.

Since the industrial revolution, technological innovation has consistently defied the grim projections of the Malthusians -- so I'm not suggesting here that the world will run out of food or fuel. But, in the short-term, natural resources -- including agricultural land -- are appreciating not only in economic value, they are becoming strategic tools. So far, the Russians and the Chinese have been most aggressive about connecting the dots between commodities and foreign policy -- for western Europeans, and even Ukrainians, Gazprom often seems a more threatening arm of the Russian state than its military; last September, China used rare earths as a weapon in a territorial dispute with Japan. With oil again at more than $100 a barrel, and food price shocks helping to spark revolution in North Africa, this is an issue everyone's foreign policy must grapple with.

3)      The Movement of People

I'm speaking in Ottawa tonight, and given Canada's enlightened approach to immigration, my points here may seem self-evident. But they are less obvious almost everywhere else, and they should be an important part of a broader geo-economic way of thinking about the world. The crucial idea here is to see the movement of people not only as an issue for the global aid community (refugees) or as a question of border security, but as a powerful contributor to national success in the global economy. I'm proud of the degree to which Canada understands this.

One point on which it may be worth elaborating is how technology and cheap transport have changed the immigrant experience. When my grandparents finally made it to Canada from Ukraine, that was it -- they never went back. Partly, of course, that was because the Soviet Union was an authoritarian regime that didn't welcome return visits from political refugees. But it was also because travel was expensive and communication was hard. Contrast that with my friends Andrei and Natalka, whose children go to Ukrainian school with mine in New York. Andrei, whose brother lives in Toronto, sends his two sons home to his village outside Chernivtsi every summer. His mother visits Toronto and New York at least twice a year. Andrei and his brother send significant money back home to their parents, and they are avidly involved in Ukrainian civil society. Nor is that true only for investment bankers like Andrei, who works at Barclays. My friend Nadiya works as a cleaner and babysitter in New York. She will start training as a teacher in September. She, too, sends money back to Ukraine, goes home at least once a year, and keeps up with her friends on Odnoklasnyki, the local version of Facebook.

Every émigré community -- take, for instance, the satellite dads who shuttle between families in Vancouver and business in China -- has its own story of cross-border family, economic and business connections. The CEO of Zappos, the shoes and everything else online retailer, is the son of Taiwanese immigrants. He has put his émigré roots to work by appointing his father to find and run the mainland Chinese factories where Zappos own-label shoes are manufactured. (It works the other way, too -- I live in America, but I cling to my Canadian passport and personal and professional relationships.)

Adapting to a world in which immigration is no longer a one-way trip is an important project for a geo-economics, because it is both an opportunity and a threat. Again, given the venue, I probably don't need to underscore the ways in which immigrants who maintain strong connections with their home countries can be a source of national economic strength.

But not all governments love the idea of cross-border communities: after all, Wael Ghonim and Mohamed El-Baradei, two catalytic figures in the Egyptian uprising, have homes abroad. Meanwhile, Peter King, whose Long Island congressional district is less than 50 miles from where I live, is launching hearings into America's Islamic communities. One of the things he is suspicious of is the kinds of close and continuous links with another country that I've been describing.

An economically focused approach to foreign affairs means understanding our immigration policy not just as a domestic issue but as an important part of how our country is connected to the rest of the world and to the global economy. Countries that get this right will be plugged in to the rest of the world at an organic level that hundreds of trade delegations could never achieve. But in exchange they will need to embrace an expansive notion of citizenship and national belonging that some will find culturally threatening -- and that does sometimes have the potential, as we have seen in some of the alienated Muslim communities in Europe -- to erupt into a real security threat.

Developing an approach to foreign policy that addresses these three big issues is an enormous task, of course. But it is even harder than I’ve made it sound. One reason is because of two powerful cross-currents that complicate any effort to develop a national way of thinking about the world economy.

The first is the fact that business is global, but politics is still mostly national. The job of foreign policy is to represent the interests of the citizens of a particular country, defined by its national borders, in the world. (A small personal footnote: I’m reminded of this very domestic anchor of foreign policy every time a friend asks me why I’m not a member of the Council on Foreign Relations, one of America’s most globally savvy think-tanks. But its mission is to figure out America’s relationship with the rest of the world -- so only Yanks can be members, which is fair enough.) By contrast, business and business leaders, play on an international field.

Remember Charlie Wilson’s maligned comment that what was good for General Motors was good for America? For an increasing number of the world’s most successful businesses, that just isn’t true anymore. The fortunes of big, international companies with Canadian roots like RIM or my own Thomson Reuters are only loosely tied to those of the country as a whole. Even America, which was once vast enough to be the main market for its national champions is receding in importance for some of its iconic firms. Consider Jeff Immelt’s observation when I recently interviewed him: “I came to GE in 1982. For the first twenty years... the American consumer was the definitive driver of the global economy. Now, part of that was false, right? Part of it was credit that they probably shouldn’t have had and houses were built that probably shouldn’t have been built. But that was the fact... So, now, well, the American consumer will always be important. But for the next 25 years it’s probably not going to be the engine of global growth. It’s going to be the billion people joining the middle class in Asia, it is going to be what resource-rich countries do with their newfound wealth... That’s the game.”

And it is not just business which is global -- the people who run and own companies are, too. Glenn Hutchins, co-founder of private equity group Silver Lake told me, “A person who runs a big African bank and went to Harvard might have more in common with me than he does with his neighbours and I could well share more overlapping concerns and experiences with him than with my neighbours … Beijing has a lot in common with New York, London or Mumbai. You see the same people, you eat in the same restaurants, you stay in the same hotels. But most important, we are engaged as global citizens in cross-cutting commercial, political and social matters of common concern. We are much less place-based than we used to be.”

In many ways, the globalisation of business is a very good thing -- and not just for the bottom line. Remember Tom Friedman’s Golden Arches Theory of Conflict Prevention -- the idea that no two countries with McDonald’s restaurants would ever go to war with one another. Sadly, that nifty notion was disproven by Russia’s invasion of Georgia in 2008, but the basic thesis that market economies were less likely to fight each other than state-controlled ones pointed in the right direction. The rich web of mutually beneficial, cross-border economic relationships that global businesses create surely helps to make the world a safer place.

But the globalisation of business also makes it harder to formulate an economically-oriented national foreign policy because it is getting harder and harder to figure out which nation companies and their executives belong to. To take the specific and fraught issue of China’s exchange rate. A lot of American voters seem pretty convinced that a stronger renminbi would make American-made goods more competitive in the global market-place and that that would be good for American workers. But what about the US company that has already out-sourced its manufacturing to China and sells those goods back home? It may be benefitting from a Chinese weak-currency and export-led growth policy, even as America-the-country, at least in some people’s view, suffers from it.

Of course, there is nothing new about conflicting economic interests within a single state. We are, however, accustomed to thinking about foreign policy differently: while we don’t always agree on specific policies, we like to think there is a single, definable, national interest our policies should serve. And if the main job of foreign policy is to keep our country secure that is mostly the case. Saddam Hussein either was or wasn’t a threat to Canada’s national security, and depending on your answer to that question participating in the war in Iraq either was, or wasn’t, a good idea. But it is harder to see how Hussein would be a threat to some Canadians and a boon to others. In an age of globalisation, and of an emerging global super-elite, the national economic interest is much messier to define.

That’s not the only complication! Here’s the second cross-current: an economically-focused foreign policy is tough to formulate not only because it is hard to define a single national economic interest. It is also difficult because, as international relations come to be defined more and more by economic relations, foreign policy starts to intrude into what used to be strictly domestic concerns. Iceland and Ireland’s willingness to stand-by the debts of its private banks; China’s consumer demand; America’s monetary policy -- these are all domestic issues, and fraught ones. But they have become international ones, too, and ones that politicians in foreign countries are becoming less and less shy about addressing. Where do we draw the line?

I’ve been making a very big argument tonight -- that the chief job of foreign policy today is helping to figure out the rules for the global economy and defending each nation’s interests within it. Having said that, I want to be clear that economic issues can’t be the only ones foreign policy addresses. Some countries still pose old-fashioned security dangers -- Iran and North Korea threaten the world with their nuclear engineers, not their financial ones. Climate change is the ultimate global issue, since no country can tackle it on its own, and efforts to address it will sometimes be at odds with the priorities of a strictly economically-led foreign policy. Finally, defending human rights should be an important objective of foreign policy, and that, too, will sometimes be hard to reconcile with an economic agenda, especially when it comes to dealing with rich but repressive players like China and Russia.

But the age of economic relations as the primary arena for interactions between states is already upon us. And that is true not only for countries that, as it were, live in a good neighbourhood. Consider one of the world’s more tempestuous next-door relationships -- that of Ukraine and Russia. For Ukraine, Russia poses a very real, even existential, security threat -- remember Georgia. But, at least for now, the main instruments of amity and enmity are economic: trade in energy and other commodities, cross-border investments in strategically important companies, etc.

Or think about North Africa. The uprisings there look to be as transformative for the region and the world as were the revolutions of 1989. These are political upheavals, and they have already provoked a very difficult and traditional foreign policy dilemma -- should outsiders intervene in Libya? But the long-range consequences of the Jasmine Revolution and its copycats may well be to further shift the focus of western policy towards geo-economics. If, as it is surely reasonable to hope, these revolutions are the beginning of a shift to Turkey-style governments in the area (democratic, capitalist and fairly secular) that will be one more reason to doubt that a ‘Clash of Civilisations’ style showdown between militant Islamic theocracies and the west is the main foreign policy challenge of our time.

Moreover, a more economically-focused approach to foreign affairs might have meant fewer of us were so wrong-footed by the North African uprisings. That assertion may come as a surprise -- after all, the west’s preoccupation with secure oil supplies from the Middle East is surely a major reason we have been so tolerant of authoritarian regimes there. But in calling for a geo-economic approach to foreign policy, I am urging something more complex than simply seeing our relationships with other countries as being purely about trade. My point is that fitting in to the world economy is the pre-eminent challenge for most countries in the world today -- and failing to fit in to the world economy is the main reason the kleptocratic, unequal, technologically stagnant regimes of North Africa have been overthrown by their people.

I’d like to conclude by admitting that I’ve attacked a very big issue today and to thank you for your patience with the fact that my remarks have been more about offering a set of questions than a single, perfect answer. Rebalancing the world economy, and finding our place in it, is a huge and complicated task. You might say that in foreign policy we are entering the age of George Soros, by which I mean that the best policy-makers will have the skills of the macro hedge fund traders of whom Soros is king -- an ability to spot big global trends, an instinct for moments of radical change, a sophisticated understanding of the ways political and economic forces interact.

Lest that sound too remote from the job of policy-makers and politicians, running actual countries and responsible to millions of voters, rather than a few millionaire investors, let me offer a final example of what I think has been the most important and successful Canadian foreign policy measure of the past decade -- Canada’s conservative approach to banking regulation. You probably don’t think of that as foreign policy -- after all, it was the work of the Ministry of Finance, OSFI and the Bank of Canada, and it didn’t even have much to do with Canada’s role in the global economy, since it was mostly about leverage limits and capital requirements for this country’s own banks.

But it was actually foreign policy of the most important kind. Insisting on low leverage and high capital requirements was a big and contrarian decision about Canada’s participation in global finance. It was a choice to opt out of the race-to-the-bottom competition between New York and London; it meant RBC remained a stodgy domestic mortgage-lender, while Edinburgh’s RBS became a sophisticated global banking behemoth.

With hindsight, though, Canadian policy-makers’ decision to stick to their convictions, even though it meant giving up a seat at the casino that was international finance, sheltered this country from the most devastating international event since 9/11 and the subsequent wars in Iraq and Afghanistan. If foreign policy is about protecting your country from external threats, this surely counts as a triumph.