JULY 2018

Takeaways from the Aspen Ideas Festival: Political Spotlight, Part I

Category: Portfolio Management

 By Doug Cohen, Managing Director, Portfolio Management

I had the privilege of attending the 2018 Aspen Ideas Festival in late June, a gathering place for scientists, artists, politicians, historians, educators, activists, and other great thinkers to present, debate, and discuss some of the most important and fascinating ideas and issues of our time. The sessions generally touched on a wide spectrum of political, technological/scientific, social, and women empowerment oriented themes.

A former professor of mine at Harvard Business School used to say that you will almost always be well ahead of the pack if you can distill any given class or presentation into three key takeaways—as well as one important issue that went unaddressed. Along those lines, here is Part I of my key observations from the speakers of the sessions that I attended on the themes of American Democracy and Globalization.

 Understanding Trump’s Foreign Policy

Evelyn Farkas — Nonresident Senior Fellow at the Atlantic Council; former US Deputy Assistant Secretary of Defense for Russia, Ukraine, and Eurasia under President Obama

Kori Schake — Deputy Director General of the International Institute for Strategic Studies; former Senior Policy Advisor to the McCain presidential campaign

Thomas Wright — Director of the Center of the US and Europe; Senior Fellow at the Brookings Institution

1) It is a mistake to believe that Trump’s foreign policy is based on impulse and intuition. He has a core set of beliefs that he has articulated consistently since the 1980’s. He believes that our allies have taken advantage of us on trade deals and that our immigration laws are poorly enforced. He also seems to hold autocrats in high regard. He seemingly felt somewhat boxed in during his first year in office as he felt out what it was like to be the president, surrounded by several aides with more traditional globalist views. Most of those advisors, with few exceptions, such as Defense Secretary Mattis, have been replaced. Trump is now fully engaged in executing his agenda—and to be fair, he campaigned and was elected on those issues. The net result is that the post-World War II social liberal democracy framework is now at great risk (this was a common perception expressed by many throughout the conference). The consensus among panelists was that the old social order could easily be restored if a new president is in office in 2021—but it could be very difficult to revive four years later.

2) When asked what Trump has done well in foreign policy circles, after a period of silence, a consensus emerged among the panelists that the president was correct to retaliate against Syria following their use of chemical weapons. Another point was made that the president was correct to provide Ukraine with anti-tank defenses to dissuade Russia. No one mentioned North Korea. When this was raised, the feeling was expressed that Trump made a reasonable decision to meet with North Korean leader Kim Jong Un, but that dangerous compromises were made with very little gained in return. Japan and other allies in the region are likely increasingly nervous. The South Korean President has come to feel that he could not fully rely on the US and thus has moved toward engagement with the North. The personal admiration that Trump expressed for Kim was seen as shocking. At best, a “gentleman’s agreement” could dissuade Kim from taking provocative nuclear actions during Trump’s presidency but none of the panelists expect denuclearization to occur.

3) When asked about the President’s apparent respect/affection for Russia’s President Putin, the point was made that Trump has always wanted to do business in Russia and that he has had more of a beef with our traditional allies in the sense that they “took advantage” of us on trade issues. Russia was more of the “wild west” where the rules are more akin to what Trump experienced in the past in the New York commercial real estate world. Another view was that he respected what he sees as a “macho/male dominated” Russian culture.

When asked about whether Trump’s style and policies are likely to result in war, the answers were: (i) Yes, it’s worse than you think because we will likely have to fight without our friends at our side, (ii) Yes, in that the tension between Israel and Syria could well boil over (with Iranian intervention), and (iii)Yes, but it will be an economic war because this Administration does not believe in traditional alliances with foreign governments, does not understand global markets, and will not know how to act in a financial crisis—particularly with former chief economic advisor, Gary Cohn, gone.

--A key question that was not addressed: “Who, if anyone, does Trump rely heavily upon for foreign policy guidance?”

Axios AM Live

Mike Allen — Axios Founder and Executive Editor

The founder of the fast growing news source with a heavy emphasis on nonpartisan “insider” Washington insights in a “smart brevity” format emphasized the following:

1) Results from the Democratic primaries on June 26 have left the party increasingly energized and optimistic about taking back the House in November (the GOP continues to have a very good chance to retain its slight majority in the Senate). The fact that House Speaker Paul Ryan has decided to step down is a signal that he sees the House swinging back to the Democrats. However, the Democrats continue to move heavily toward the left which could pose a major challenge in the 2020 general election. Axios sources indicate that Michael Bloomberg is heavily considering a run in 2020 as a Democrat, a notion reinforced by his recent announcement that he would contribute $80 million to Democratic candidates for the fall elections.

2) Approximately 70% of Americans think the mainstream media occasionally puts out “fake news” with 90% of Republicans and 53% of Democrats agreeing. “There’s a crisis of trust toward the media…and in some ways we deserve it. The biggest problem with fake news is the people don’t always believe the real news.” He also suggested that the Trump administration occasionally seeks to plant false reports so that they will get picked up by media outlets that can then be discredited.

3) There is enough current and likely future opposition to Trump’s domestic priorities that the President is likely to pivot toward more overseas initiatives going forward. The Middle East is his top priority but to the extent that his agenda hasn’t progressed well, North Korea may well take center stage. Trump’s comfort with utilizing personal relationships to drive change is likely to remain a powerful element of his approach. Trump also likes to emphasize (and have his aides emphasize through back channels) that “he’s crazy”—as a potential source of negotiating leverage.

--A key question that was not addressed: In alleging that the Trump administration is planting stories to further its own aims, does that imply that other administrations have not done the same thing?

North Korea: The Threat Assessment

Christopher Hill — Former US Ambassador to Iraq and South Korea; Professor of Practice in Diplomacy at the University of Denver

Jay Lefkowitz — Senior Partner at Kirkland & Ellis; former Policy Advisor to Presidents George W. Bush and George H.W. Bush; US special enjoy to North Korea

Jung Pak — Senior Fellow and SK-Korea Foundation Chair in Korea Studies at the Brookings Institution

1) Much like the panel the focused on Trump’s foreign policy agenda, the consensus was that President Trump wasn’t necessarily wrong to meet with Kim Jong Un. There are no easy options, including military options, and having a direct dialogue between the leaders is unusual but not necessarily bad. That said, the view was that the final statement released by the two leaders was extremely vague, that Trump was wrong to make concessions such as ending “War Games” (the term the North Koreans have usually used to describe joint military exercises) and sending US troops back home, that the US undermined the efforts of Japan and South Korea, and that there is no clear path forward if Secretary of State Pompeo and Trump cannot make enormous progress in the next three to six months.

The US had North Korea on its back feet with sanctions and let them off the hook (this of course is the same criticism that was directed at the Obama administration regarding the Iranian nuclear deal). The only real positive may be that the US averted a short-term nuclear crisis (albeit one that the US may have helped to create from Trump’s earlier “Little Rocket Man” rhetoric). In the meantime, nuclear and chemical proliferation from North Korea remain a substantial risk, compounded by the reality that there is usually plausible deniability with proliferation threats.

2) The Singapore Summit was seen as a major win for Kim Jong Un as it further legitimizes him as a world leader, not the naïve 27 year old who was perceived to have taken office with little chance of maintaining the “family business.” Kim likely think’s “I’ve won” in that he made no formal concessions, agreed to no formal timeline, and has now gained international prestige despite a litany of murderous and other criminal acts that make the country a “human rights disaster.”

3) The strong consensus was that economic carrots will not mean much to Kim. He doesn’t want McDonald’s and the like to come to North Korea to help usher in a new era of economic growth. He has all the money and power he could want right now and economic growth and freedom are likely threats to his regime. The ultimate challenge is to make Kim believe that a future without nuclear weapons will be better than a future with them. It’s unclear what could really make that the case. The US should continue to consider a sabotage program and other techniques that may reduce the long-term risk.

--A key question that was not addressed: The experience with North Korea highlights the enormous amount of leverage a nation can obtain by developing a nuclear weapons capability. What does that imply in regard to Iran and decisions to support deals such as the one that President Obama’s administration negotiated?

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