Two big crises for Washington: Financial meltdown and Af-Pak escalation

Washington’s decisionmakers are today confronted with two huge and hard-to-handle crises. On Wall Street the large brokerage firm Lehman Brothers declared bankruptcy, after Treasury Secretary Hank Paulson decided the US taxpayer couldn’t afford to bail it out Merrill Lynch and the insurance firm AIG are also in very bad trouble. And in Afghanistan and Pakistan, tensions between the US and anti-US forces, primarily the resurging Taliban, have escalated to a point where they now pose a serious political crisis to the broadly pro-US (and nuclear armed) government of Pakistan.
Each of these crises points out the extent to which Washington, on its own, is no longer able to exert control over aspects of international life that until recently it was easily able to dominate.
Regarding the Wall Street crisis, the actions and preferences of foreign investors– primarily those from East Asia– has been crucial. The timing Paulson’s actions regarding Lehman– where he intensively explored a number options before he finally decided not to intervene– and earlier, in the case of Fannie Mae and Freddie Mac, was reportedly chosen to allow him to have the maximum impact before the Asian and European stock markets opened after their weekend. One of the banks he was hoping could help bail out Lehman was Britain’s Barclay’s Bank; and one of the other chief candidates to help out was reportedly a South Korean investment entity. But he was unable to clinch any of these deals.
Meanwhile, in the single, rapidly agglomerating crisis zone that I am tempted to call Af-Pakistan, it is becoming increasingly clear that the US– even with its NATO allies– is quite unable, without the help of the world’s other big powers, to calm the tensions and start to resolve the deep political problems that underlie the present crises in both constituent parts of Af-Pakistan. (I made this argument, regarding Afghanistan, in this early-August CSM piece.)
Some of the most thoughtful, up-to-date, and consistent reporting on Af-Pakistan is that provided by Joshua Foust at Registan.net. Today he writes this about the latest reported US raids into Pakistan:

I really don’t understand how the U.S. can be expected to craft an appropriately subtle policy for the area—even if CJCS Mike Mullen is at the helm (I have tremendous respect for Adm. Mullen). For one [thing]… there is the messy problem of sovereignty—like it or not, whether you agree with how it’s being handled or not, that is sovereign Pakistani territory.
Pretending the Pakistani government has done nothing about the tribal areas is daft: at American insistence, they have lost nearly 1,000 troops trying to quell the uprising there since 2004—about double what NATO and Coalition nations have lost in Afghanistan since 2001. Though only now, since removing the odious Pervez Musharraf, has the government been trying negotiations not with the militant leaders but the few tribal leaders left alive who are willing to take a stand, these have not been given a chance to succeed. It takes time—during the war against the Faqir of Ipi from 1936-1947, the British had miserable luck even getting the local maliks to tamp down on anti-British violence, though on occasion it worked. But the Faqir was only undermined after Partition, when agitating for a Muslim State became unnecessary…

Foust very helpfully reminds us that anti-Islamabad, anti-western agitation in Pakistan’s tribal areas “is not a new problem—there is no reason to re-invent the wheel or hyperventilate while pretending it is.”

I certainly agree it’s not a new problem. However, if the tribal agitations– and also, the US’s violent over-reactions to them– succeed in seriously destabilizing the Pakistan government, then that has huge further political ramifications for the entire strategic situation in that very sensitive part of the world.
Actually, the stance and policies that the US is now adopting towards Pakistan look somewhat comparable to the stance that Israel adopted for many long decades towards Lebanon, which was also a US ally.
Both in the days when the PLO had an armed presence in Lebanon, and later, when Hizbullah grew up there, Israel would (and still does) claim the “right” to launch “punitive raids” into the country, whether under a doctrine of “hot pursuit” or some other pretext. Indeed, some of those raids sent ground forces deep inside Lebanon, where they would stay and run an occupation regime for some length of time: most famously, the 22-year occupation of the so-called “security zone” in South Lebanon.
All this though Israel prides itself on being a law-abiding nation and a US ally, and while Lebanon was also a US ally…
In Af-Pakistan, the structure of the conflict is a little different. It is the US occupation force in Afghanistan, not the Afghan government, that is undertaking the raids into Pakistan. And Pakistan is directly an ally of the US. Go figure.
This morning, the BBC reported this:

Pakistani troops have fired shots into the air to stop US troops crossing into the South Waziristan region of Pakistan, local officials say…
It emerged last week that US President George W Bush has in recent months authorised military raids against militants inside Pakistan without prior approval from Islamabad…
In the latest incident, the tribesmen say they grabbed their guns and took up defensive positions after placing their women and children out of harm’s way.
Pakistan’s army has warned that the aggressive US policy will widen the insurgency by uniting the tribesmen with the Taleban.
Last week the army chief declared that Pakistan would defend the country’s territorial integrity at all cost, although the prime minister has since said this would have to be through diplomatic channels rather than military retaliation.

It is possible to conjecture that the US military’s current round of stepped-up operations inside Pakistan may be connected to the Bush administration’s desire to capture Osama Bin Laden before the US election, November 4. But whether that’s the case or not, the operations are certainly doing a lot to destabilize Pakistan’s already fragile governance system– while they have done nothing at all to improve a situation inside Afghanistan that the EU’s outgoing envoy has now described as “the worst since 2001.”
It is hard, at this point, to figure out how these two big crises might affect the election here in the US.
On the economy, McCain yesterday continued to insist that “the fundamentals of the US economy are strong.” He looked as though he was trying to run on a bit of an anti-Wall Street, populist platform? Obama, more seriously and more plausibly called the fall of both Lehman Brothers and Merrill Lynch “the most serious financial crisis since the Great Depression” of the 1930s.
He also took the opportunity to criticize McCain’s broader economic philosophy:

“It’s a philosophy we’ve had for the last eight years — one that says we should give more and more to those with the most and hope that prosperity trickles down to everyone else.”
“It’s a philosophy that says even common sense regulations are unnecessary and unwise, and one that says we should just stick our heads in the sand and ignore economic problems until they spiral into crises…”

Not a lot of detail there yet on the specifics of how Obama would deal with the country’s roiling financial instability. However, he has given enough specifics about his tax policy and other aspects of economic governance to show he has a good grasp of how the economy actually works. (Unlike McCain.)
On Af-Pakistan, Obama’s has been quite clear for many months now that he supports the use of US military power against suspected terrorist targets inside Pakistan, even without gaining the permission of Islamabad.
This is just one of the ways in which, as Dan Eggen writes in today’s Wapo, “Bush’s overseas policies [have begun] resembling Obama’s.”
Eggen writes that Obama’s aides say that some of the recent foreign-policy moves Bush has taken

complicate matters for McCain, who is more hawkish than his opponent on issues including the crisis in Georgia and the war in Iraq.
“What we have here, in many ways, is that a McCain presidency would look a lot like a Bush first term and a move back in that direction,” said Rand Beers, who.. is now an unpaid adviser to the Obama campaign. “The flip side of that is that John McCain is therefore to the right of George Bush, which I don’t think is the way he conceived of his campaign.”

But the Af-Pakistan situation– like the Wall Street crisis– could still get a lot worse in the six weeks between now and the election. At a first guess, that would seem to be bad for McCain’s chances, and good for Obama. Except that in a situation of acute foreign-policy crisis, US voters might well show a strong tendency to seek a sense of security from a “trusted, older white guy” person.
It certainly wouldn’t be the first time that’s happened here…