I have a small confession to make. When I received a letter from George Schwab inviting me to receive the third George Kennan Award, I was both surprised and pleased. After all, for an economist and central banker to be honored by an organization of distinguished practitioners and scholars in the arcane field of foreign policy is something special.

I was, in fact, so overwhelmed by the invitation that I entirely overlooked the last few sentences of the letter. They referred to the need for the honoree to deliver an address—not just any address but a foreign policy address.

Well, I am not simply honored but truly humbled—if not absolutely speechless—to receive this award from an organization founded by the giants of American foreign policy.

Grace, I know your father only as an icon, revered for the sweeping vision and intellectual clarity that he brought to the role of the United States in the post World War II world. George Kennan has been, not so incidentally, the personification of the ideals of the American professional public servant: non-partisan, a reservoir of wisdom and experience, loyal and true to his convictions while dedicated to serving the nation’s leaders. Those qualities seem to me all too rare these days, to the detriment of consistent and effective public policy, domestic and foreign alike.

Happily, Brent Scowcroft is firmly in that tradition. Somehow our military establishment has remained in high repute in these days of skepticism about Government in general and bureaucrats in particular. His career path—culminating in two tours of duty as Assistant to the President for National Security Affairs—is a tribute to his personal qualities of quiet leadership, his unswerving loyalty and plain good judgment that so many Presidents have found invaluable. It is also a reflection of the training, the breadth, and the ability of so many in our armed forces.

Now, let me take up at least briefly the challenge of that last paragraph of George Schwab’s letter. No doubt in asking me to speak, he had in mind a simple point. The world of economics, finance, and budgets is both driving much of the foreign policy agenda and circumscribing our freedom of action.

I suppose that has always been true. But today it’s all been intensified. Cheap and instantaneous communication, more and more trade among more and more countries, hundreds of billions of dollars loose in the world’s money and capital markets—define ever more sharply the mutual dependencies and constraints within which we must live. At the same time, we have to find a way to deal harmoniously with the entry of billions of people in the emerging economies into the modern world.

The end of the Cold War hasn’t brought anything like the end of history. Instead, the problems have a way of changing and multiplying. Nuclear proliferation and the idea of “suitcase bombs” (or their equivalent) in the hands of terrorists, chronic ethnic unrest exploding in armed conflict, the endemic Middle Eastern and Korean disputes, the economic distress and political instability in the area of the former Soviet Union, the emergence of China on the world stage—we face a seemingly endless list of challenges for foreign policy. In fact there are so many points of strain and trouble that we have to keep reminding ourselves, as George Kennan has warned on more than one occasion, that however shrunken the world, the United States cannot take responsibility for dealing with every threat to peace and democracy and human rights at any time and at every place.

At the same time, there seems to me an opposite danger: that we will shrink back too far from what only we, as the remaining world super power, can and should do to preserve and extend a prosperous and peaceful world.

If that is a tough balance to maintain, it’s made all the more difficult by a strange paradox in American life and attitudes.

On the one side, we approach the end of the American century with a renewed sense of confidence in our economic performance. That success is particularly pronounced relative to our economically stumbling partners in Europe and Japan. We invest all over the world, and capital is pouring into our own booming financial markets in even larger amounts. The main military threat is gone. We have reduced our defense budget from its peak by 30 or 40 percent and still maintain a military capability far stronger than any combination of enemies (or allies).

The triumph of the ideas of market capitalism right around the world has been largely an American vision. Not so incidentally, it has opened new vistas for growth and investment by American firms, financial and non-financial. Less tangibly, but surely a fact, American culture—its ideals, its methods of doing business, its language, (as well as aspects of which we may be less proud)—are spreading around much of the world.

Despite all that, there is nonetheless a distinct feeling of impotence—of lack of control and influence—running through the country. With the overriding military threat gone, our old allies are more absorbed with their own or regional affairs. The big multilateral institutions that were largely an American inspiration seem less relevant or maybe they are just asked to do too much. Even though unemployment is way down and our taxes the lowest in the industrial world, our resources, real and budgetary, are deemed too strained to support new initiatives, or even to maintain long-standing ones. Our expenditures for foreign assistance are at the bottom of the international league.

If I exaggerate all that for the sake of making the point, there is no mistaking the lack of interest among the American public in external affairs. It is reflected in and amplified by the parochialism of the Congress. (I am told that seats on the Foreign Relations Committees of the House and Senate, for a long time the most sought after and prestigious reward for seniority, these days almost go begging). To the extent foreign policy is debated, both our main political parties are fractured. We have the odd spectacle of the muscular nationalism, typified by Pat Buchanan Republicism, allied with protectionist, human rights, and environmental sympathizers among the Democrats. Seemingly modest and sensible Administration initiatives are hard to pass and a lot of energy is used in deflecting impetuous Congressional forays into foreign policy.

Now, it can be said that all of this is something of a reversion to type. The bi-partisan internationalism of the 1950’s, ’60’s and ’70’s was a product of special circumstances: the depression, World War II and the perception of a massive threat to our national security. The problem is that reversion to type is not good enough—not in a world in which so many threats to our well being remain, and a world in which there is simply no substitute for coherent American leadership.

What worries me, as I suspect it worries you, is that the combination of growing national parochialism and inescapable international influence is an indigestible mixture—a recipe for inconsistent foreign policy confusing to friend and foe alike.

No doubt, the break-up of the Soviet Union, the enormous changes in the balance of world economic forces, and the lessons of experience have justified important changes of emphasis in foreign policy. We are a country with large and chronic trade deficits, facing intense and often unfair competition. A more vigorous defense of the competitive interests of our businesses is surely in order.

I do not want to suggest it would be desirable, or remotely feasible politically, to return to the kind of massive aid programs characteristic of the 1950’s. In today’s world, foreign aid as a kind of international entitlement is no more attractive than welfare dependency at home.

We are justified, I think, in asking our allies to share in the fiscal cost of Operation Desert Storm when we carried so disproportionate a share of the military burden. No doubt, attention to the efficiency and mode of operations of some of the big international institutions is reasonable.

What is at issue is the way we pursue those objectives, whether we do it in a manner consistent with our long standing interest in open markets, in multilateralism, in keeping strong ties with our traditional partners while we encourage development in emerging nations.

More and more we seem (more precisely, the Congress seems) to react to things we don't like by the imposition of unilateral sanctions, even sanctions with extra-territorial reach. Sanctions, of course, have a certain surface appeal: they have no direct budgetary cost, they are a vehicle for expressing moral outrage, they are politically popular. But the bark is often louder than the bite. Implementation is difficult and even more so in this world of easy trade and fluid capital and the side effects are unpredictable.

Experience and analysis suggests sanctions are usually ineffective in achieving their stated purpose except in limited circumstances and when they command something of an international consensus.

The United States has traditionally been the instigator and supporter of multilateral approaches in the areas of trade, finance, and development. We were rightly concerned that regional trading and financial arrangements—unless justified by the aim of deep economic and political integration—would be inherently discriminatory. Carried very far, the world could be led to competing economic and political blues.

The Canadian/U.S. free trade agreement was surely a reasonable exception to that policy, given extremely close and open economic relations. The extension to our other neighbor, Mexico, had clear objectives in stabilizing and supporting its economic reforms. It is not so obvious to me that the same logic applies with respect to Chile, or Latin America generally, countries that in the past had not, for the most part, had the same uniquely close trading relations with the United States. And can we logically move in that direction and resist regional arrangements in Asia or elsewhere in the world?

What is also in question is our willingness to whole-heartedly accept the role of the new World Trade Organization—itself a direct legacy of our own traditional support for multilateral organizations. We have been in the habit of assuming the role of prosecutor, judge, and jury in trade disputes; accepting the WTO as the court of last resort is hard to swallow. And that is true despite the view of trade experts that in most such disputes the United States position would likely be vindicated.

Still more disturbing is the chronic reluctance of the largest and richest country in the world to meet its share of negotiated financial support for the World Bank and the regional financial institutions. And when those funds are provided, they are at times conditioned on support for very particular American objectives. Plainly, such unilaterally imposed conditions are inconsistent with the nature of those institutions. Engaged in generally by member countries, the institutions would be unable to function.

Most egregious to me is our continued failure to pay our dues to the United Nations—obligations that, unlike contributions to the international financial institutions, are a treaty obligation. No doubt complaints about U.N. administrative efficiency have merit, and certainly some of the debate in the General Assembly is irrelevant and frustrating. But it is more than a little odd that, after demonstrating our muscle by single-handedly disposing of the Secretary General and placing our own man in charge of administration, we still don’t pay our share of the bill. Would we really be happy—without an operating U.N., able to provide its banner and international legitimacy to peace keeping and peace making? How many in the Congress understand that the U.N. budget hasn't increased in real terms for years?

The current debate over the enlargement of NATO provides another case in point. Whatever the merits of the decision to support expansion—and I personally find these elusive—the debate should turn on larger considerations than the possible budget impact of $100 million or so—a small fraction of the cost of one stealth bomber.

Quite obviously there are no quick and easy answers to the kind of questions I have raised. They reflect long-standing and deep-seated attitudes as well as changes in objective circumstances. It’s not a matter of this administration or that; Republicans and Democrats alike are struggling with the same conditions. Both have placed able and experienced men and women in key foreign policy and economic positions. And both face sharply competing forces within their own parties.

Objectively, we ought to be in a stronger position to lead than in a long time.

Our economic circumstances have obviously improved, not just in relative terms but absolutely. The mood seems more optimistic, for good reasons, and the sense of insecurity and losing out that characterized so much of the work force seems to be diminishing. We are at least approaching budget balance. The simple fact is that at a time of prosperity we should be running a surplus, but we are at least at a point when our priorities can be re-examined.

Something less tangible may be holding us back. All our personal experience, every poll, the record of exceptionally low voter turnouts, our morning newspapers, reflect an absence of confidence and credibility in government. So long as that lasts, we shouldn’t wonder at the difficulty of maintaining consistent and outward looking policies. In a real sense, all those working away in Washington or elsewhere—whether on campaign reform, on reinvigorating the bureaucracy, on improving the electoral and appointment process—are working in the cause of foreign policy.

The idea that government is unimportant, that we can be satisfied with mediocrity, that the way to make views known is not to pay our bills simply isn’t consistent with our responsibilities.

Americans have proved time and again they are a great people in responding to crisis. Maybe what’s missing now is a sense of true challenge—a challenge that’s plainly recognized, a challenge that demands attention and that justifies action and even sacrifice.

Such a challenge doesn’t have to be artificially manufactured. It is there.

China’s President will soon visit Washington. It is the first true Summit in years—a Summit in the sense that what happens or what doesn’t happen is vitally important. What is at stake is the prospects for bringing China—a quarter of mankind—peacefully into the world community.

The way Russia goes, with all its military potential, is still uncertain. Iraq, Iran, the Israeli/Palestine festering sores are not just regional concerns but matters that unresolved can rock our world.

We hear a lot about the unparalleled prospects for sustaining growth, for bringing billions of men and women out of poverty, for health, for culture—and for peace. There is a lot to do. I have no doubt that it is all within reach.

But it’s not on automatic pilot—any more than the business cycle is dead or inflation is gone forever. It will take foresight, effort, cooperation and leadership.

Abraham Lincoln, in the middle of the 19th century expressed his conviction that America was the last best hope of mankind. Those are proud words, hard to sustain and justify. But we’ve done pretty well, for these last hundred years and more. As we enter the 21st century, I don’t think history has left us much choice.