From the start, the American state learned to turn external rivalry into internal cohesion. That habit preceded the modern national security establishment. It took shape in a young republic that struggled with war debts, regional factions, and a thin administrative core, yet still managed to construct a fiscal and naval foundation at speed. The deeper truth is institutional rather than emotional. America needs an enemy because external threat coordinates a sprawling federation, clarifies priorities in Congress, and licenses policies that would be contested in peacetime. The pattern produces fiscal capacity and industrial direction. It also leaves a residue of rigidity and overreach that financial markets price in quietly.
The Hamiltonian program illustrates the mechanism. The 1790s federal assumption of state debts, the creation of a national bank, and the build-out of customs enforcement drew political cover from real and perceived dangers, including British interference at sea and upheaval tied to the French Revolution. A young Treasury could sell debt, because an anxious polity would accept taxation and institutional innovation in the name of survival. Naval appropriations followed, justified by the need to defend commerce against the Barbary corsairs. Customs revenue protected by frigates created a loop. Threat funded the navy. The navy protected revenue. The cycle stabilized federal credit. Hostility at the waterline made centralization palatable inside a fractious union.
The War of 1812 extended the logic. Tariffs rose and domestic manufactures gained policy legitimacy because British disruption of trade made import substitution look like defense rather than mercantilism. Washington acquired a more durable claim on national priorities. The institutional upgrade did not flow from ideology alone. It came from a pragmatic recognition that a continental democracy with weak administrative capacity would need an organizing narrative if it hoped to mobilize capital and labor at scale. The story that worked was external rivalry, even when the adversary shifted and the casus belli was contested.
By the late nineteenth century the frame migrated from survival to projection. Alfred Thayer Mahan’s naval strategy popularized the idea that maritime power determines national destiny. Spain’s weakness in 1898, Germany’s rise before 1917, and Japan’s expansion in the 1930s delivered successive enemies that underwrote big steps in state capacity. Income taxation, the Federal Reserve, war finance, and standardized procurement took shape not as technocratic tidiness but as responses to threat. Each wave set new baselines for how much debt markets would tolerate and how much industrial policy the electorate would accept.
The Second World War and the Cold War scaled the template. Threat moved from episodic to structural. Defense spending became a semi-permanent allocation rather than a temporary spike. An R&D state emerged, with laboratories, federal grants, and mission agencies that persisted after the shooting stopped. Silicon, satellites, and software incubated inside security budgets. The alliance system cooperated with the monetary order. Security guarantees encouraged allies to recycle surpluses into Treasuries. Sanctions enforcement used the same pipes as settlement and clearing. The safe asset status of US government debt rested partly on a peace that America policed and partly on a rival that America defined as existential.
The collapse of the Soviet Union did not erase the operating system. It loosened it. The 1990s featured a short interlude in which markets and technology became national purpose by default. The terrorist attacks of 2001 restored the coordination device. The enemy was non-state, the tools shifted to surveillance and expeditionary logistics, yet the effect was similar. Budgets rose. Legal authorities expanded. The industrial base adapted to new procurement cycles. Then the system crept back toward great power competition. Russia’s assertiveness and China’s ascent reactivated the classic frame. Export controls, investment screening, and technology bans migrated from niche compliance to core policy. A semiconductor licensing decision now reads like a naval deployment did in 1900.
This lineage explains why contemporary US politics can be polarized at home yet consistent on external rivalry. A divided Congress will still enact the CHIPS and Science Act, fortify CFIUS processes, extend outbound investment restrictions, and accelerate defense production. The causal chain is institutional. External threat reduces veto points. It compresses legislative bargaining space. It permits fiscal deficits that would be attacked if justified by social investment alone. It expands the executive tool kit. It demands timelines that align bureaucracies that otherwise move at different speeds. For a federal system with fifty states, bicameralism, and frequent elections, an enemy functions as a coordination technology.
Capital markets have responded to the pattern with their own quiet logic. The US defense budget behaves like an automatic stabilizer during cyclical downturns, which dampens volatility in regional industrial ecosystems from Virginia to Texas and Arizona. The Treasury market enjoys a demand premium during geopolitical stress, which finances deficits more painlessly than in peer jurisdictions. The sanctions apparatus, which depends on the centrality of the dollar and correspondent banking, remains credible precisely because it is framed as a security tool rather than a trade lever. The legal posture that blocks advanced chip shipments or clamps down on dual-use tooling becomes more enforceable when placed inside an adversarial narrative. The cost of capital for targeted actors rises, while the cost of capital for US suppliers and substitutes declines.
The risks are not imaginary. Enemy-driven policy can ossify supply chains and subsidize incumbency. It can expand emergency powers and shrink the space for cost-benefit scrutiny. It can harden tariff walls that outlive their strategic purpose. It can convince allies that coordination is coercion, which pushes them to hedge reserve holdings or create alternative rails for trade settlement. A long series of emergency justifications also complicates fiscal sustainability. Debt service costs rise when nominal rates climb, and perpetual threat makes consolidation politically harder. The market can continue to finance big deficits for a long time, but not at any price and not under any governance posture. The premium that once flowed from credibility can erode if the narrative of necessity stretches too far beyond the underlying risk.
For Asia and the Gulf, the enemy framework matters because it predicts the tempo of regulatory change. A benign business cycle does not slow enforcement of export controls if those controls are written as national security law. The Committee on Foreign Investment in the United States will not become lenient simply because a downturn hits, if the relevant transactions are coded as security sensitive. Singapore and the Gulf states, positioned as neutral logistics and financial nodes, gain from the redirection of capital and supply chains, yet they must absorb complexity in compliance, technology standards, and sanctions exposure. Sovereign allocators in these markets will continue to see two opposite pressures. US assets retain safe asset advantages, especially during stress. Risk diversification requires exposure to non-US pipes that can handle energy payments, commodity trade finance, and technology services without triggering secondary sanctions. The optimal posture is dynamic rather than binary.
It is also useful to separate rhetoric from policy mechanics. The phrase America needs an enemy can sound like cultural habit. It is better parsed as a design feature of a system that resists central planning in normal times. The constitutional architecture disperses authority, which complicates long term mobilization for infrastructure, education, or industrial policy. External rivalry simplifies decision space. It turns permissive authorizations into mandated ones. It gives the executive branch standing to coordinate across agencies. It moves appropriations from discretionary to essential. The result is not always efficient, and sometimes it is wasteful, but it is legible to markets and allies. It is legible because it repeats.
The historical record from the early republic supports this reading. When the navy was contested as a luxury, the Barbary threat made it necessary. When a national bank was painted as elite overreach, the prospect of fiscal crisis made it prudent. When internal improvements were blocked by states’ rights arguments, strategic logistics reframed them as defense enablers. In every instance, the enemy, real or proximate, acted as a policy solvent. It dissolved resistance faster than persuasion could. That is why so many US technological waves began in a security context and then generalized. The lineage runs from wartime procurement to peacetime consumer markets more often than the reverse.
Today’s version remains familiar. Industrial policy is framed as resilience rather than renaissance. Clean energy subsidies are justified as supply chain security. Technology alliances are sold as trusted networks. Maritime and air corridors are patrolled with an eye to chokepoints that matter for semiconductors and energy. Financial sanctions are deployed with a sense of escalation ladders. Each instrument borrows credibility from the security frame. Each instrument tells investors how durable the posture will be across electoral cycles. That durability is what capital prices in.
None of this requires American leaders to crave conflict. It requires them to recognize that domestic coalition building often needs an external focal point. The risk is not that adversaries will disappear. The risk is that the definition of adversary will stretch to include every inconvenient competitor or dissenter, which would degrade policy precision and invite symmetrical responses. Prudence in definition matters as much as persistence in posture. It is the difference between a credible containment strategy and a noisy embargo that leaks.
For policymakers and sovereign allocators in Asia and the Gulf, the practical question is not whether the United States will maintain the habit. The question is how that habit will interact with cycle dynamics. A soft landing in the United States would not unwind export controls on leading edge lithography. A recession would not cancel security-linked subsidies for strategic manufacturing. Elections will change tone and tactics, but the institutional incentives that make external rivalry a coordination device will remain strong. The wiser response is portfolio and policy flexibility, legal hygiene across sanction regimes, and operational redundancy in logistics and data. The premium will belong to jurisdictions that can be interoperable with the US system while retaining transaction channels that do not freeze under stress.
The conclusion is not romantic. It is functional. The United States learned early that adversity could build the institutions it lacked. The habit did not end when those institutions matured. It adapted to new adversaries, new technologies, and new geographies. Markets formed expectations around the pattern and priced instruments accordingly. That is why the phrase America needs an enemy continues to forecast policy direction better than many ideological labels do. It does not predict outcomes. It does predict persistence. In practice, that persistence is what matters for capital allocation, alliance management, and the rules that govern technology and trade.
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