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The Global Connection : The Mexico peso crisis highlights a new reality: The distinction between foreign affairs and domestic concerns is increasingly meaningless.

<i> Michael Clough is a senior fellow at the Council on Foreign Relations</i>

Forget Chechnya, Bosnia, Haiti. And if you still remember Rwanda, Somalia and the Persian Gulf War, forget them as well. The Mexican financial crisis rep resents the first real test of America’s ability to respond to the challenges that are most likely to dominate the future global agenda. And judging by the unprecedented steps President Bill Clinton was forced to take last week to circumvent mounting public opposition to his efforts to help Mexico, we are failing.

The issues raised by the peso’s sudden collapse defy the old ways of thinking about foreign policy. Indeed, they call into question the very idea that foreign affairs can be distinguished from domestic concerns. Today’s “foreign"-policy issues mostly involve relationships among increasingly integrated but also more diverse and divided societies, not nation-states. One result is that the influence of national governments and internationally oriented elites is declining.

One of the most dangerously misleading myths being promulgated by many foreign-policy “experts” is that we are finding it difficult to meet the challenges of the post-Cold War world because Americans are turning inward. In fact, Americans are more connected with the rest of the world than ever before--and also are more aware of how developments beyond their borders can affect their livelihoods, health, personal security and moral peace of mind. The problem is that they are unconvinced that the people who make “foreign” policy in Washington understand their problems, share their interests or reflect their values.

The indicators of Main Street America’s growing global connections are many. Two spotlighted by the peso crisis are trade and investment.

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During the past three decades, the share of U.S. gross national product represented by exports and imports has more than doubled. According to one recent estimate, exports now amount to roughly 23% of total output of manufactured goods and imports nearly 28% of domestic consumption of manufactured goods. As a result, millions of American jobs are now linked to trade flows.

An even more dramatic shift has occurred in investment patterns. A decade ago, a relatively small percentage of Americans owned stocks, and an even smaller percentage had any investments abroad, direct or indirect. Today, as a consequence of the explosive growth of individually owned mutual funds, the number of people on Main Street tied to Wall Street has increased tremendously. Nearly 40% of Americans now own stocks either directly or indirectly; and of the more than 25 million households believed to participate in mutual funds, nearly one-half have annual incomes below $50,000.

A rapidly growing percentage of these investments, furthermore, are in foreign stocks. Between 1984-94, the value of internationally oriented mutual funds grew from just under $6 billion to more than $135 billion. As of late 1993, nearly half of all new mutual-fund investments were going into these funds, and more and more of them into such emerging markets as Mexico, China, India and South Africa. One Merrill Lynch Latin American fund grew from $69 million in net assets, in 1991, to $921 million by August, 1994.

In the near term, the volatile Mexican stock market and rising U.S. interest rates are causing many investors to bring their money home. In the long run, however, the shares of foreign stocks in Americans’ portfolios are certain to increase--as will the share of foreign earnings on the balance sheets of U.S. companies.

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Beyond economics, the steady flow of immigrants, legal and illegal, into the United States has created a new set of demographic realities that inextricably link our future with the futures of China, India, the Philippines, Vietnam and, most significantly, Mexico. Between 1971-90, nearly 12 million immigrants entered the United States legally, more than the total number who had entered in the preceding 50 years. While changes in U.S. policy made it easier for immigrants to legally enter, it has been developments in other countries that have determined who has come, legally and illegally.

For example, in the late ‘70s and early ‘80s, wars, droughts and revolutions in the Horn of Africa caused thousands of Ethiopians to come to Washington, D.C. Similarly, conflicts in El Salvador, Guatemala and Nicaragua transformed whole neighborhoods in Los Angeles. And given the close and longstanding bonds between China and Chinatowns in Los Angeles, San Francisco, New York and other U.S. cities, coupled with the growing numbers of Chinese students on U.S. campuses, it is not difficult to imagine the kinds of future immigration pressures that would be created by widespread unrest in China with its billion-plus population.

The increasing movement of people across U.S. borders is also making global forces more and more a factor in such traditional domestic concerns as education. Public schools must cope with the demands of educating an increasingly multilingual student population. This is as true in Greenwich, Conn., where more than 10% of the students participate in English-as-a-second-language programs, as it is in East Los Angeles. The only difference is that demagogues tend to pay more attention when the children’s parents are gardeners, maids and seamstresses than when they are bankers and lawyers.

The impact of all these forces is accelerated and magnified by revolutions in communication and transportation. Mainly because of cheap international air fares, the number of Americans traveling abroad for business, pleasure or study has grown markedly over the past three decades. But the effect on U.S. society of this travel has been dramatically increased in the past decade by faxes, computers and a growing web of transnational professional and non-governmental associations. People from different countries, who in the past might have traded occasional letters, now keep in touch on a day-to-day basis, regularly exchanging news, opinions and business tips. As the electronic superhighway grows and pressures to ensure greater access to it increase, U.S. society will become even more aware of and enmeshed in the affairs of other societies.

And, of course, there is CNN, and Telemundo, and Univision, and CNBC, all of which bring the rest of the world into U.S. homes on a 24-hour basis, while simultaneously giving the rest of the world an eye into America. Americans can directly witness the effects of famine in Africa, look into the eyes of Saddam Hussein, and rejoice at Nelson Mandela’s first steps into freedom. Similarly, riots in Los Angeles or tourist murders in Miami become international events directly affecting attitudes toward America--and hotel bookings.

In the face of these realities, it is absurd to argue that America is turning inward, or to take seriously the fear that we are about to follow a new band of “know-nothing populists,” led by Patrick J. Buchanan, down the path of “neo-isolationism.” The real problem is the yawning divide between the foreign-policy Establishment and the American public.

Within the foreign-policy Establishment, there is now constant chatter of “new global realities.” Most of the talk, however, is about finding ways to fit today’s world into yesterday’s frameworks. That is a reason why debates in Washington so quickly become discussions about stopping ethnic violence in Bosnia, restoring democracy in Haiti and preventing North Korea from acquiring nuclear weapons. Once allowances are made for historical context, all these problems are easily explained in terms Theodore Roosevelt and Woodrow Wilson would have understood. But the Washington debate seems far removed from everyday American concerns.

The problems most upsetting to Americans--expensive health care, failing neighborhood schools, violence, the widening gap between rich and poor--do have a global dimension. But that dimension is not what seems to matter most to neo-Cold Warriors who still speak in terms of foreign threats to national security and neo-Wilsonians who call for a new U.S. crusade for worldwide democracy.

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Even when officials in Washington do attempt to speak in terms working Americans understand--as Clinton did when focusing on possible job losses as a result of a falling peso--they are seldom convincing. Too often, their arguments sound like special-interest pleadings wrapped in public-interest rhetoric.

The public’s distrust of foreign-policy elites is further reinforced by these elites’ disdain for the opinions of ordinary Americans. To most policy-makers, the public is an ill-informed nuisance. In the case of Mexico, however, the problem is that the public knows too much rather than too little. For example, most Americans know that Mexican officials and supporters of the North American Free Trade Agreement deliberately concealed Mexico’s mounting financial difficulties last year, and that American investors and the Mexican upper classes benefited far more from the foreign capital flowing into Mexico than most American and Mexican workers.

It is imperative that we develop a new way of thinking about U.S. relations with the rest of the world. It is no longer a matter of Washington either doing battle with or coming to the rescue of foreign governments or their citizens. Rather, we must begin to find ways to develop policies that help our society and other societies to cope with the pressures created by globalization. Unfortunately, as long as Americans doubt that policy-makers are genuinely sensitive to their concerns and interests, it is going to be difficult to build broad support even for policies, like the Mexican relief package, that clearly serve the public interest.


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