- The Washington Times - Tuesday, August 10, 2004

The core of economy is not money but trust. Human relationship is the fundamental criteria for trade. In macroeconomics, as in microeconomics, the basic act of economy — investment — is based upon trust: “I trust you, I believe in what you are doing, so I invest in you.” The rest, even if it sounds trivial, is a matter of mechanical management.

Therefore, the context in which money shall be invested relies upon this confidence that the world’s situation is good, secure and stable enough to allow growth and profits. On the world stage, the context is secured by the only superpower left since 1991: the United States. It does not make all economic policies, but it helps substantially.

This economic trust based on the United States took on a new significance after September 11, since the only power able to fight terror, to gather a coalition and to secure the interest of the civilized world was the United States. The course of action that was taken spread confidence among investors who see in such worldwide interventions a way to secure the international context somewhat. Indeed, it could be better, but without intervention it would be worse. As a result, the financial global situation is rather good. This is mere fact.

In this point of view, the coming presidential election is crucial for the world economy, since the two foreign policies the candidates want to implement are opposite and would have financial consequences. While President Bush believes the United States has a responsibility to make the world more secure, Sen. John Kerry is advocating a “progressive internationalism” by giving up what he calls “erratic unilateralism” and engaging in multilateralism — which means diplomatic negotiations to unite all allied nations against the enemy.

But, as it is understood by European investors, for instance, “progressive internationalism” means the withdrawal of U.S. troops and working like the United Nations: It is considered inefficient. NATO, U.N. forces and the Eurocorps do not have the trust the U.S. Army has. And this is also mere fact. In such an unsecure world, since trust is a major key to investors, U.S. withdrawal could mean the slowing down of investments: It is inevitable. Who would invest if there are no guarantees that in case of turmoil, upheaval or war, an armed force would go settle the problem ?

Policy leaders and business leaders are aware of this, even if public opinion is not enlightened on this vital point: Knowing an armed force would hit wherever to secure and build free and open societies creates a real feeling of trust. Indeed, U.S. military actions have economic and social consequences that cannot be ignored since trust allows investment, investment creates prosperity, and prosperity brings open societies and eventually democracy.

But today, the outcome of the coming presidential election is awaited anxiously abroad — so much so that some investors are already slowing down investments, gathering cash and waiting for November. This, too, is a mere fact.

Sylvain Charat is chief of staff of Alain Madelin, former secretary of finance in Jacques Chirac’s government (1995) and French representative at the French National Assembly.

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