A Portfolio Theory of Foreign Affairs: U.S. Relations with the Muslim World

Author:Liaquat Ali Khan
Position:Professor of Law, Washburn University. The author is thankful to Ijeomo Wogu, Kevin Keatley, and Amy Greiner for their research and editorial assistance.
Pages:377-410
A Portfolio Theory of Foreign Affairs: U.S. Relations with
the Muslim World
Liaquat Ali Khan*
I. INTRODUCTION ......................................................................................... 377
II. PORTFOLIO MANAGERS AND STAKEHOLDERS ......................................... 381
A. Portfolio Managers ............................................................................ 382
B. General and Special Stakeholders ................................................... 384
III. PORTFOLIO MANAGEMENT .................................................................... 389
A. Portfolio Objectives ........................................................................... 390
B. Portfolio Tools ................................................................................... 396
C. Regulatory Agencies .......................................................................... 398
IV. VESTED PORTFOLIOS.............................................................................. 400
A. People‟s Portfolios.............................................................................. 401
B. Select Portfolios ................................................................................. 402
C. Management Portfolios ..................................................................... 405
1. Statutory Portfolios ................................................................... 405
2. Executive Portfolios ................................................................... 408
V. CONCLUSION ........................................................................................... 409
I. INTRODUCTION
This Article analyzes foreign affairs through modern portfolio theory,
with special emphasis on U.S. relations with the fifty-seven states of the
Muslim world.
1
Harry Markowitz, the author of the modern portfolio theory,
argues that ―a good portfolio is more than a long list of good stocks and bonds.
It is a balanced whole providing the investor with protections and
opportunities with respect to a wide range of contingencies.‖
2
The application
of this theory to foreign affairs means that a nation‘s foreign policy is a set of
investments analogous to inve stments in the stock market. Fo reign policy
portfolios are thus economic, diplomatic, and military investments that a
* Professor of Law, Washburn University. The author is thankful to Ijeomo Wogu, Kevin Keatley,
and Amy Greiner for their research and editorial assistance.
1
This number includes the State of Palestine. See ORGANISATION OF ISLAMIC CONFERENCE,
http://www.oic-oci.org/member_states.asp (last visited Mar. 26, 2011).
2
HARRY MARKOWITZ, PORTFOLIO SELECTION 3 (1991).
378 TRANSNATIONAL LAW & CONTEMPORARY PROBLEMS [Vol. 20:377
nation makes in international affairs to protect a nd promote its interests and
values.
3
These portfolios can cultivate econo mic ties with other nations, forge
peace treaties and defense alliances, offer cultur al exchanges for mutual
awareness, provide assistance to needy nations, and make inte rnational
commitments to human rights. Successful portfolios can earn substantial
return on investments, which raises the national standard of living,
safeguard national security, furnish leadership opportunities in international
institutions, and generate goodwill th at the nation and citizens can draw on
to cultivate beneficial relationships across borders. In contrast, f ailed
portfolios can un dermine diplomatic and economic relations, provoke
economic sanctions and trade boycotts, weaken national security, increase
risk of invasion and terrorism, and negatively affect citizens‘ opportunities in
international markets. The United States invests significant economic,
military, and diplomatic resources in international relations with the Muslim
world. Unfortunately, the return on these portfolios has been disappointing.
The portfolio theory acknowledges a vibrant and complex world of
international relations in which nations, large and small, prosperous and
underprivileged, strong and weak, cooperate and compete with each other to
protect national security, acquire n atural resources, develop trade
opportunities, influence geopolitical events, and advance national interests
and values. Although nations launch portfolios to promote their interests and
values, they do not always succeed. For a host of reasons, including national
egotism, domestic politics, incompetence, scarcity of diplomatic resources,
lack of vision, and misinterpretation of geopolitical realities, nations launch
and maintain losing portfolios. For the same reasons, some nations, un able to
discard or readjust failing portfolios, compound risks to their national
interests and values. Just as experienced investors can pursue unprofitable
portfolios in capital markets, like wise, experienced nations can launch
unsuccessful portfolios and e xpose the nation to serious domestic and
international threats. The portfolio theory clarifies why certain portfolios,
even though they are harmful to the state‘s natio nal interests and values,
cannot be discarded or readjusted.
The portfolio theory presumes that internation al relations are highly
competitive, and even contentious. Much like other states, Muslim states and
the United States administer portfolios to compete for natural resources,
economic prospects, trade opportunities, diplomatic esteem, and leadership
seats in international institutions and agencies. They also launch portfolios
3
GLENN PALMER & T. CLIFTON MORGAN, A THEORY OF FOREIGN POLICY 36 (2006). The authors
mention foreign policy portfolios but focus more on what they call two-good (change and
maintenance) theory. The authors, however, make an important point that the state‘s foreign
policy should be considered in terms of a bundle of portfolios. The two-good dualistic thesis,
conceived at a high level of generalization, appears to be too all-encompassing and, therefore,
sometimes uninstructive. It fails to recognize that foreign policy is a messy business, sometimes
anchored in incompetence and ignorance, that sometimes changes when it should maintain, and
maintains when it should change, and sometimes violates national supreme interests and
international law.
Summer 2011] U.S. RELATIONS WITH THE MUSLIM WORLD 379
to compete for ideological influence so that other nations respect their
economic, political, religious, and constitutional frameworks. Sometimes
Muslim states and the United States p ursue mutually incompatible interests.
Similarly, investors in capital markets pursue conflicting interests taking
long and short-term positions in the same company, currency, or index.
Unlike conflicting positions in stocks, currencies, and indexes tha t
purportedly add stability to capital markets, conflicting portfolios may pose
substantial risks to international peace and security. And just as securities
laws are needed to re gulate capital markets, international law is critical for
discouraging nations from pursuing unlawful portfolios. Regulatory agencies,
such as the World Trade O rganization and International Atomic Energy
Agency, can deter unlawful portfolios and maintain balance between lawful
but contentious portfolios.
The portfolio theory further presumes that state behaviors are so varied
and complex that uncertainty (maybe chaos) rather than orde rliness
permeates international relations. U.S. portfolio manage rs face a highly
complex Muslim world that is both diverse and united. Co nsisting of over a
billion individuals, the Muslim population epitomizes human diversity as its
members belong to distinct geographical, racial, ethnic, linguistic, and
cultural communities, some with little shared historical experiences. For
many centuries, Arab and Turkic communities belonged to the Ottoman
Empire. The Caliphate associated with the O ttoman Empire symbolized the
global unity of Islam.
4
Since dissolution of the Ottoman Empire in the 20th
Century and the rise of the nation-state, Muslims have become dispersed and
divided. Arabs cherish their new nation-states while the Arab League strives
for the elusive goal of Arab unity.
5
Central Asian states are breaking away
from the communist past and realigning with the Muslim world. Indonesia
and Ma laysia, located in the Chinese sphere of influence, are developing as
prosperous states committed to Islam.
6
Iran and Pakistan, though
geographically contiguous, process international relations differently.
Pakistan values its ties with the United States, whereas Iran paints the
United States as the ―Great Satan.‖
7
Kashmiris, Palestinians, and Chechens,
living under non-Muslim states, interpret geopo litical realities as occupied
4
The concept of Caliphate (Khilafat) is derived from the Qur‘an. See Qur‘an, sura al-Baqara 2:30.
The term khalifa means a successor. Although the Qur‘an uses the term khalifa in a nonpolitical
sense, the establishment of the Caliphate after the Prophet‘s death acquired spiritual -political
meaning. The first four Caliphs, all the Prophet‘s companions, are highly regarded in Islamic
law. The later Caliphs, ho wever, lost their spiritual authority, and turned into political heads of
the Islamic world.
5
See Pact of the League of Arab States, 70 U.N.T.S. 237.
6
See Kikue Hamayotsu, Islam and Nation Building in Southeast Asia: Malaysia and Indonesia
in Comparative Perspective, 75 PAC. AFF. 353 (2002), available at
http://www.bgu.edu/SiteMedia/_courses/reading/Art11-IslamHamayotsu.pdf.
7
See Mohammad A. Tabaar, The Beloved Great Satan: The Portrayal of the U.S. in the Iranian
Media since 9/11, 6 CROSSROADS 20 (2006), available at
http://www.webasa.org/Pubblicazioni/Tabaar_2006_1.pdf.

To continue reading

FREE SIGN UP