Ven and the art of hemispheric maintenance: America’s national-security posture

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0:49The Economist

0:56Hello and welcome to The Intelligence from The Economist. I'm your host, Jason Palmer. Every weekday, we provide a fresh perspective on the events shaping your world.

1:11There are thousands, millions of them in many of America's cities. They're putting stress on local businesses, changing local economies. They are empty office chairs. We look at the new risks arising from the new-ish era of working from home. And for many people, there are four words that bring deep disappointment. We only have Pepsi. But in one region of the world, that is the standard answer. We ask why.

1:47First up, though.

1:56I want to read you a little passage from America's latest national security strategy, released, weirdly, in the dead of night almost a week ago. The United States must be preeminent in the Western Hemisphere as a condition of our security and prosperity, a condition that allows us to assert ourselves confidently where and when we need to in the region.

2:22That is one lens through which you might see last night's seizure of a Venezuelan oil tanker, confident assertion of hemispheric preeminence. Venezuela called it piracy. Whatever the plans the Trump administration has for the country, the strategy document makes for unsettling reading throughout the West. One person who may not have read it is Donald Trump. When asked about it, he's demurred and prevaricated. So how much does it reflect his thinking? And how much of its plan will survive his whim? Every administration is required to release a national security strategy by Congress. But this document was really unusual in that it declared civilizational erasure, as it calls it, to be the top threat to America.

3:10Aaron Connolly is our Asia diplomatic editor. And then it pledges to take steps to make sure that this doesn't happen. So what are the steps that it's talking about? Well, it spends a lot of time on the Western Hemisphere, which is unusual. It says that it's going to redeploy American military forces from around the world to ensure that America remains top dog in Latin America. That'll go down very badly with a lot of Latin American countries that still resent America's history of gunboat diplomacy and political interference in the 20th century. It says that it'll secure America's borders, as we've discussed, but it goes beyond that to say that it will support right wing, far right and populist right parties who pledged to do the same in Europe.

3:53But the strategy is a lot less hawkish on China than the first Trump administration's national security strategy. It does restate parts of America's position on Taiwan, the so-called strategic ambiguity on Taiwan that is intended to deter a Chinese invasion. But it doesn't go into as much detail as to the nature of the challenge that China poses to American power. Coming back to the stuff you say about being top dog in the Western Hemisphere, how then to think about what's going on in Venezuela with the seizure of this tanker? Well, it's hard to tell. You know, this could be the first step in an escalation that leads to something like airstrikes or even a ground invasion designed to remove Nicolau Maduro from power.

4:35But it's not clear that that's actually what this is. You know, this could just be the latest escalatory step in a strategy that's basically a bluff to try to get Nicola Maduro to leave of his own free will. But we won't know for some time yet. And as for what it says about the rest of the world, it's sort of interesting the degree to which you say it sort of projects this immigration question onto European allies. Yeah, you know, it seems to want to make Europe more MAGA-like. And so, you know, the NSS talks about backing what it calls healthy European countries, mostly thinking of more authoritarian countries like Viktor Orban's Hungary and promoting patriotic European parties like his Fidesz.

5:14But in an interview with Politico this week, President Trump really dodged the question of how involved he planned to be in the domestic politics in Europe, although he did go on at length about immigration. They want to be politically correct, and they don't want to send them back to where they came from. And if you take a look at Paris, it's a much different place. I loved Paris. It's a much different place than it was. If you take a look at London, You have a mayor named Khan. He's a horrible mayor. He's an incompetent mayor, but he's a horrible, vicious, disgusting mayor. I think he's not a terrible, but London's a different place.

5:50I love London. I love London. And I hate to see it happen. He ended by saying that he wanted to run the U.S., not Europe, but he offered little clarity as to how much credence you can give his support for this strategy under his name. And on its worst reading, you could see this strategy as an American acknowledgement that Europe should fall within Russia's sphere of influence. And Europe's leaders should interpret that as a real danger. And that does on its face sound dangerous, but broadly, a lot of what you're saying is in this report. We've heard before either from Mr. Trump himself, from members of administration.

6:26Should we be surprised that this has been now codified into a document? I think on the one hand, yes. You know, we've seen things like J.D. Vance's speech in Munich in February, in which he made some of these very same points. But what's new is that this is a statement in black and white under the president's signature saying that the United States is going to interfere in European politics. And that is new. And it's also interesting if we compare it to the first Trump administration national security strategy published in 2017. That strategy heralded a new age of strategic competition, clearly named China and Russia as threats to America.

7:03And the latest document abandons that framing. There's clearly a shift going on in Washington, I think driven by a desire to keep a planned summit with Xi Jinping in Beijing in April on track and probably commercial considerations as well. And we saw that this week in the case of the Trump administration's decision to allow Nvidia to sell some of its best chips in China. But there could be a further shift coming here. You know, Washington is abuzz with speculation that Secretary of State Mark Rubio and Secretary of War Pete Hegseth might leave their positions in the coming year. And both of them have been very supportive of America's allies relative to others in the administration.

7:43So what does that mean for this plan? And if their positions aren't so secure, how much is this plan a roadmap of what we can expect to come. You know, there's a debate in D.C. about how important a document this really is. Some insiders in the administration told us that this is really a polemic, not policy, and that it will be forgotten in weeks. But the document does mirror quite closely the views of Stephen Miller, the deputy White House chief of staff, who's also really the original MAGA ideologue. So it could be a real indication as to where the administration is going, especially if Secretaries Rubio and Hegseth leave the administration in the coming year.

8:20There are other more radical MAGA figures who are now ascendant. And if they replace those two cabinet members, they could exercise real influence over policy in this direction. But ultimately, the arbiter of whether this is policy or not is going to be the president. And, you know, he makes decisions based on some long held views on things like trade and migration, on his relationships with individual leaders, and then on his instinct at any given moment. So, you know, a document that he does not seem to have read may not be a very good indicator as to where he is going, but hope is not a strategy, and it would be better to prepare for the worst.

8:58Aaron, thanks very much for your time. Thanks, Jason.

9:13With no fees or minimums on checking accounts, it's no wonder the Capital One bank guy is so passionate about banking with Capital One. If he were here, he wouldn't just tell you about no fees or minimums. He'd also talk about how most Capital One cafes are open seven days a week to assist with your banking needs. Yep, even on weekends, it's pretty much all he talks about, in a good way. What's in your wallet? Terms apply. See CapitalOne.com slash bank. Capital One N.A. member FDIC.

10:11And my colleague, Vingero Mkandowire, a news editor here at The Economist, says the long-run effects in America are becoming clearer. Despite efforts to get people back into the office, remote working has become entrenched in America. Full disclosure, we're both working from home today. City centers have largely recovered, but only partially. City officials knew that the economics of their downtowns would change, but the full effect is only just appearing as office leases signed before the pandemic begin to expire. So let's start with the leases. What does their expiry mean for local economies?

10:50This is about people just not using as much office space anymore. It potentially means emptier offices on a permanent basis if fewer people are commuting to the centre. On average, around 15 % of workers across America's biggest metropolitan areas mostly work from home. But we know that in cities like Austin and Denver, where close to one in four workers are remote, more than a quarter of office space is empty. That's the highest share among big American cities. Eventually, that will put city budgets under strain. And that's what we're seeing today. Austin expects property values to fall by a tenth next year, and that means less tax revenue for the city.

11:34Other working-from-home centers are experiencing similar problems. For example, in San Francisco, Portland, and in Seattle, more than a fifth of employees work mostly or entirely from home. But let's get to the budgetary strains here. This is just about the tax take going down? Fewer people going downtown impacts nearby businesses as well, like shops and cafes. It also means less spending on things like transport. And San Francisco is a great example of this. It's had one of the slowest recoveries in foot traffic to offices of any American city. Before COVID, the city's transport agency got more than half its budget from transport fares and parking fees.

12:22but now those revenues account for around a third and that's left a ballooning deficit so it's more than just the tax take but another trend that we talked about a lot during the pandemic was all the people piling into some cities austin in particular i remember standing out that has something to do in this equation too doesn't it yes i did the same thing i moved outside of london and some working from home hotspots in america did attract new residents from other parts of the country. Denver and Austin were certainly at the forefront of that trend. However, this migration has slowed and borrowing costs have risen, and that affects house prices.

13:03Denver and Austin now have some of the highest shares in the country of houses where sellers have been forced to reduce asking prices. More than half of asking prices have been reduced in Denver and Austin, and in Portland and Seattle, it's nearly half. that will eventually mean tax revenues are lower than they otherwise would have been. So if you are local government, what do you do about this? Is there a fix? America's cities are still feeling the consequences. Denver has already imposed public sector hiring freezes and layoffs. San Francisco city government plans to cut jobs and services. Austin is doing things like reducing funding for parks and emergency medical services.

13:51And it's not just working from home capitals with budget pressures. At least 20 of America's 25 biggest cities have reported budget shortfalls for the current fiscal year. But ultimately, a solution to this is giving people reasons other than working in an office to go downtown. I think Canary Wharf in London is a great example. I used to work there and it was usually quite empty in the evenings and on weekends. But since COVID, it shed its image as a sort of sterile office district. And people hang out in Canary Wharf now. Vinjeru, thanks very much for your time. Thank you for having me.

14:49The Middle East is just about the only region in the world where Pepsi is more popular than Coca-Cola. Gareth Brown writes about the Middle East for The Economist. Order a fizzy drink in Baghdad or Beirut, and the chances are you'll be served a Pepsi, not a Coca-Cola. And nowhere is this more obvious than in Iraq. with the Baghdad Softdrinks Company, which produces hundreds of thousands of bottles of Pepsi per day.

15:20This one can, you said it can bottle how many per hour? 50 ,000. 50 ,000 bottles per hour. But why has Pepsi been so successful here? There's a long political story to it and there's also some smart navigation of political fault lines in the region. We have to go back to the 1960s. Arab governments across the region had just been humiliated by a resounding military defeat to Israel, and in response to that, they imposed a boycott on countries deemed to be interacting or normalising with Israel. Coca-Cola had announced plans to open a bottling factory in Israel, and so Arab governments launched a boycott against the largest soft drinks brand in the world.

16:04But by the end of the 1980s, Saudi Arabia was about to host the Youth Football World Cup and Coca-Cola was its main sponsor. It wasn't rational for Arab governments to be boycotting one of the main sponsors of the tournament. But by then, Pepsi had already cemented its dominance in countries across the region. So how did they manage this? Well, to put it simply, by shrewdly playing local politics. In places like Lebanon, Jordan, Iraq and Saudi Arabia, Pepsi has co-opted unions, it's pursued aggressive marketing strategies, and signed hefty exclusivity contracts with local distributors. In Iraq, Pepsi is dominant in Arab parts of the country, but cross into the Kurdish region in the north, where the economy is closely linked to turkeys, and Coca-Cola is king.

16:53Last year there was a minor scandal when it turned out that Hazem al-Shara, brother of Syria's jihadist-turned-President Ahmed al-Shara, had been holding a senior position at Pepsi and Erbil. He left that job to return to Damascus and help his brother run Syria. In Lebanon, the family behind Pepsi production has built close ties to influential Druze factions. And in Saudi Arabia, Pepsi has a market share of 70%. That's in a market worth more than$6 billion a year. But there's one striking island of Coca-Cola Red in the Sea of Pepsi Blue, Palestine. There, Coca-Cola's market share is more than 90%, according to one licensee I spoke to.

17:34But even there, the tide may be changing. The war in Gaza prompted a new wave of international boycotts, particularly against American companies deemed to be supporting Israel. A number of local brands, Kinza, Zee, Palestine Cola, started to eat into the dominance of Pepsi and Coca-Cola. But the consensus is they don't taste nearly as nice. and more than two years later, the big hitters are already clawing back whatever market share they lost. For now, at least, politics aside, the people in the Middle East remain primarily loyal to their taste buds.

18:21That's all for this episode of The Intelligence. We'll see you back here tomorrow.

18:53tell you about no fees or minimums. He'd also talk about how most Capital One cafes are open seven days a week to assist with your banking needs. Yep, even on weekends, it's pretty much all he talks about in a good way. What's in your wallet? Terms apply. See CapitalOne.com slash bank. Capital One N.A. Member FDIC.