“Fifteen years ago, the United States was short vol. Now it’s long vol,” observed an acquaintance who trades options. By this he meant that the United States stood to lose from instability during the Cold War, and stands to gain from it now. Options are the right but not the obligation to buy a security. For example, I can buy the right to purchase a share of IBM at $110 during the next three months for about $7. IBM now trades at $110. If it rises to $130, I make a profit of $13 on a $7 investment. The more volatile IBM stock is, the greater my chance to win. Option buyers are “long vol,” option sellers are “short vol.”

Flippant as the application of finance theory to geopolitics might appear, it provides a disturbing yet convincing characterization of the present state of affairs. The elder Bush and advisers such as James Baker and Bent Scowcroft, schooled in the Cold War, flinched at the thought of instability. Any regime, no matter how corrupt and oppressive, merited American backing, as long it was “our bastard,” as Franklin Roosevelt qualified Nicaragua’s strongman of the 1930s. It is a stretch to accuse such men of having a philosophy. Their strategic reflex came from the simple fact that the Soviet Union stood to gain from any instability outside its immediate sphere of influence. The more chaos, the more options open to the Kremlin. A coup in Western Asia, a civil war somewhere in the Pacific Rim, a war between India and Pakistan, an insurgency in Latin America gave Russia a chance to get involved. Russia had unlimited upside and little downside. It was “long vol.”

Now there is no Soviet Union. Russia remains occupied with domestic problems. China shows little inclination to fish in stormy waters far from its shores. No power stands to gain from instability other than the United States itself. American clients and enemies alike can twist and turn in the wind; America can watch and wait.

Does the Saudi monarchy rankle at American suppression of Islamic radicalism? Hang them out to dry, as Secretary of State Colin Powell already has hinted. Pull out the American troops, and see how the Saudis fare against Iraq, Iran, and their own domestic opponents. If need be the United States will occupy the Saudi oil fields. As for the rest of the Arabian peninsula, Washington can afford to leave it to the fates. Is Yasser Arafat playing games with Tehran? Let the Israelis blockade him in Ramallah, and chop up Hamas, Islamic Jihad and other friends of Osama bin Laden as best they can.

Is India on the verge of crushing Pakistan? Tell Islamabad that Washington will not hold India back unless it accedes to Indian demands to mop up Islamic militants. Does that threaten Pakistan’s stability? That’s Pakistan’s problem.

Just a year ago, America’s cold-eyed sanction of Israel’s iron hand in the West Bank would have been unthinkable. America is “long vol.” If Israel crushes the Palestinian militants, one of two things can happen. One is that the militants will seem a “weak horse” (in bin Laden’s phrase) and Arab public opinion will turn against them. Another is that the “Arab street” will rise up in protest, forcing America’s clients in the Arab world to cling to Washington for dear life.

Coups, revolutions, wars do not faze Washington. It can sit back like the council of gods in Homer’s Iliad, betting on the outcome and choosing whom to support and whom to undermine. From the standpoint of American interest, the more volatility, the more choices and the more influence.

The antipodal policies of the elder and younger Bushes reflect correlations of power. September 11 erased the credibility of Clinton foreign policy, driven by the illusion that the liberal establishment could charm the world into good behavior. Bill Clinton still wanders the world complaining that he intervened to defend Muslims in Kosovo, not understanding that the Muslim world has contempt for such manipulative condescension. All that is irrelevant now.

It is just as pointless to inquire as to the younger Bush’s philosophy as in the case of the elder. Neither had much acumen for the “vision thing.” Intentions are beside the point. Nations act according to their interest, not their intentions. No European power wanted World War I, yet they chose war rather than sacrifice their interests. America does not want an imperial role. No president of the past century evinced less interest in the world outside America’s borders than George W. Bush. Yet events drive Bush inexorably towards an interventionist stance, much to the discomfort of enemies and allies alike. It is not the meta-stability of a “New World Order,” much less the faux humanitarianism of the Clintonites, but a Machiavellian exercise of American interest.

Europe’s extreme discomfort at the unfolding of the new American policy erupts periodically, most recently in the silly complaints about the treatment of Al-Qaeda prisoners at Guantanamo Bay – as if the British had kept Irish Republican Army prisoners at a resort hotel. The painful fact is that Europe is “short vol.” Europe’s declining population makes it dependent on immigrants, and the immigrant pool it has available stems from North Africa and the Middle East. Unlike America, which easily can absorb immigrants, Europe must play host to an increasingly large and restive population of cultural aliens.

The danger is that instability in the Islamic world will spill over into Europe, leading to uncontrollable, perhaps devastating political consequences: repression, the increasing presence of chauvinistic parties, and a vicious cycle. Europe’s interest is to maintain stability at all costs. Europe is too weak to oppose the United States. Europeans cannot rail against Washington, so they rail against Israel (eg, the French ambassador to London’s comment about that “shitty little country”). Dein schlimmster Fluch wird keine Fliege toten, wrote Heine: your worst curse won’t kill a fly.

What happens next is anyone’s guess. Washington doesn’t know and doesn’t care. Many writers, including this one, grossly underestimated Washington’s military capacity in Afghanistan. The improvement of smart weapons give America such overwhelming military capability that it can use force when it has to, with little prospect of real opposition. Washington doesn’t worry. It is “long vol.” It can afford to sit back and let the rest of the world worry.

This brings to mind the old story about Cohen, who must pay Levine $1,000 in the morning and does not have the money. He paces back and forth all night, unable to sleep. His wife remonstrates, “Abe, come to bed, stop pacing.”

“I can’t sleep. I owe Levine $1,000 and it’s due in the morning, and I don’t have it.”

“You are telling me,” replies his wife, “that you owe Levine $1,000, it’s due in the morning, and you don’t have it?”

“That’s right.”

“So come to sleep. Let Levine pace.”


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