The Supplicant-in-Chief

Power tends to be a zero-sum thing. That is, only one person can wield it—and be in charge—at a time. I saw an illustration of this principle as I traveled with President Bush in Saudi Arabia last week. Midway through his two-day stay in Riyadh, a small group of us got the word: the president wanted to sit down and talk. An aide led some of the reporters in his "travel pool" into a gilded conference room, and Bush soon appeared (joking, at the door, "Do I really want to be here?"). The president was clearly in no rush. The session went on—past the half-hour mark, past an hour. I kept expecting Bush's press secretary, Dana Perino, to call a halt and usher him off to his next event; this was, after all, the most powerful man in the world, no? Didn't he have other Saudis to meet? Maybe even a Saudi dissident or two, since he'd just given a major speech in Abu Dhabi two days before pressing his "freedom agenda" on the Arab world? But Perino said nothing, and the leisurely session rambled on.

Then it occurred to me: George W. Bush literally had nothing else to do on this afternoon. He was waiting for the late-sleeping King Abdullah, Saudi Arabia's ruler, to wake up, so he could go to his ranch to talk to him about oil. Bush wasn't about to embarrass the Saudi king by seeking a meeting with would-be democrats, jailed bloggers or the thousands of other dissidents who are kept under wraps in this deeply repressed society. Bush was here to plead, in what Hillary Clinton called a "pathetic" display, for help on oil prices. It was a dramatic change in the balance of power from the time of Bush's father, who protected the Saudis from Saddam. Today the younger Bush "needs the world's biggest exporter of crude more than it needs him," writes Bloomberg's Janine Zacharia.

The commander-in-chief has become supplicant-in-chief. The leader of the free world has become the schnorrer of the free world.

This will be an increasingly familiar role for American presidents—not to mention American consumers and businesses—no matter who is elected this year. With global markets in turmoil over the prospect of a U.S. recession, Wall Street's best and brightest in semidisgrace over their disastrous misreading of the subprime mortgage debacle, and U.S. deficits looming large, the United States is in a weaker position vis-a-vis its international creditors than it has been in memory. The next president will inherit this weakness and find his or her maneuvering room as limited as Bush's was in Riyadh. With America having done virtually nothing to wean itself off foreign energy, Saudi Arabia and the rest of the OPEC nations hold the whip hand over oil production. U.S. credit markets are intimately dependent on what finance ministries in Beijing, Tokyo and Singapore will decide to do with their surplus dollars. The Wall Street giants that once set the course for global financial markets are now begging for help as well; witness the bailout of Citigroup and Merrill Lynch led by government-controlled funds out of Singapore, Kuwait and South Korea.

Some analysts insist there is little new about this problem. After all, nearly a generation ago it was the Japanese who supported America's economic bad habits—notoriously using their surplus dollars to overpay for Rockefeller Center, Pebble Beach and other American icons. What difference does it make if the Chinese and Arabs are overpaying for Citigroup and Merrill Lynch today? Doesn't that still work to our advantage, as it did with all that Japanese money that got recycled back into the good ole USA?

It does work in our favor, on the whole, but there are a few worrisome differences. For starters, the dependency is so much larger—nearly double what it was in the late '80s, with the current account deficit (the amount of foreign capital coming in) now at 5 to 6 percent of GDP. And much more of this investment is coming in the form of government-controlled "sovereign wealth funds," which means that not necessarily friendly foreign officials in Moscow, Beijing and Riyadh, rather than neutral investors, will have a significant say in our economic strength. Also, some of today's investment targets might be considered to be among America's strategic assets—Wall Street's biggest firms, for starters—in a way that Pebble Beach never was. With Democrats threatening to take over the White House and boost their control of Congress in '08, there is reason to fear a rise in protectionism that could curb foreign capital in the name of "economic security."

Certainly Bush himself heard an earful about this on his trip. A "universal concern" he heard from foreigners, the president told us at that long chat session, was that "the United States will not welcome foreign capital … I heard it from entrepreneurs. I've heard it from government leaders. They are concerned about reinvestment of dollars back into the United States."

Some experts think that as long as Washington and other governments don't interfere, the markets will straighten things out. With the dollar so weak, America will turn into an investment haven in 2008, says Moises Naim, the editor of Foreign Policy magazine. "There will be a massive flow of foreigners buying into the U.S., not as supplicants but because it's a bargain place to do business." With these investments being so diverse—it's not just the Japanese this time—America will once again be able to get away with its fiscal irresponsibility and poor savings habits, with little loss of global power. The sovereign wealth funds, after all, still represent only a fraction of overall foreign investment flows.

Perhaps. But other experts, like Kenneth Rogoff of Harvard, a former economist at the International Monetary Fund, suggest that America might suffer a more permanent loss of prestige and power. "There is something deeper going on here. The dollar might never be the same. The U.S. has had an incredible bull run since the mid 1980s. It's been one big, long boom. People have gotten used to it, and it elevated the position of the United States in the world." Today the humiliation of Wall Street because of the subprime scandal "is quite a comeuppance," he says. And Bush's lack of leverage with the Arabs may be symptomatic of a chronic condition.

Many U.S. analysts this week are indulging in a kind of told-you-so triumphalism. They are gleefully pointing out that, contrary to conventional wisdom, the global economy is not in the least "decoupled" from the U.S. market. They say the brief plunge of Europe's and Asia's markets in response to fears of a U.S. recession proves, yet again, that America remains the dominant force on the world stage. The underlying story, however, is that we are out there begging for help on every front. Hillary may consider this pathetic. But whoever wins the White House will be in the same quandary next year.