[NOTE: This is a sequel to an earlier post.] There often comes a point when the pupil surpasses the mentor in understanding; such is the nature of knowledge transfer throughout much of history. With signs indicating that the US is headed towards yet another recession for the second time in the space of a few years, you have to wonder if it has learned anything. To be sure, American policy handling of the Asian financial crisis was severe in the demands the IMF made of crisis-hit nations. Ideologically inspired strictures on liberalization, deregulation and privatization were the order of the day. Still, more sensible ones such as keeping tight reins on external and fiscal balances were in time achieved in most of these Asian countries.
The obvious contrast is with present-day America. Onetime neoliberal apostle Larry Summers is typical of American hypocrisy when crisis hit the US itself. Not only have its leaders championed deliberalization, reregulation, and nationalization, but they too make an exception in unleashing the fiscal floodgates--a veritable tsunami of government spending. Meanwhile, its trade deficit remains substantial and is increasing alarmingly as American exports slump, adding to signs of contraction elsewhere in the US economy. Einstein once said that doing the same thing over and over again and expecting different results was insanity. Powered by massive twin deficits, the US has not changed much if at all and is headed for yet another crisis. Why should we not be surprised? There is no real mystery here: If you continue to act stupidly, then foul times returning are to be expected.
Edward Goldberg over at The Globalist thus has an interesting article in which he argues that the global marketplace the US once dominated is now passing judgement on it. What's more, changes to its political system to avoid now-routine incidences of gridlock are necessary. These are matters Asian financial crisis-hit countries had to face up to, from the ouster of Suharto in Indonesia to the end of very cosy ties between big business and government in South Korea:
The obvious contrast is with present-day America. Onetime neoliberal apostle Larry Summers is typical of American hypocrisy when crisis hit the US itself. Not only have its leaders championed deliberalization, reregulation, and nationalization, but they too make an exception in unleashing the fiscal floodgates--a veritable tsunami of government spending. Meanwhile, its trade deficit remains substantial and is increasing alarmingly as American exports slump, adding to signs of contraction elsewhere in the US economy. Einstein once said that doing the same thing over and over again and expecting different results was insanity. Powered by massive twin deficits, the US has not changed much if at all and is headed for yet another crisis. Why should we not be surprised? There is no real mystery here: If you continue to act stupidly, then foul times returning are to be expected.
Edward Goldberg over at The Globalist thus has an interesting article in which he argues that the global marketplace the US once dominated is now passing judgement on it. What's more, changes to its political system to avoid now-routine incidences of gridlock are necessary. These are matters Asian financial crisis-hit countries had to face up to, from the ouster of Suharto in Indonesia to the end of very cosy ties between big business and government in South Korea:
It is almost as if today is a replay of the late 1990s, when the stock market crashed and the power of global markets challenged the power of nations such as Indonesia, Mexico, Russia, Malaysia, Thailand and Korea. Using the marketplace and financial flows as a de facto voting mechanism to assess the validity of a country's fiscal condition, during that time globalization became the arbiter of a nation's economic wherewithal. And in the process, it usurped political power from the countries’ elected leadership.And here's where Asia got it right as compared to the US:
However, somewhat unbelievably, today it is not emerging economies that are being buffeted by the forces of the markets. Rather, it is the United States, the world’s largest economy and most successful economic democracy, that is being judged by a global marketplace that it once dominated.
How strange and even difficult to comprehend that the global markets are forcing the hand of President Obama and the U.S. Congress. Witness how announcements from the President and the Speaker of the House of Representatives are timed to the opening or closing of world markets.
Looking back to the late 1990s, one of the main demands of the marketplace was a change in political culture. These countries had to get their financial houses in order by breaking up their traditional "old boy networks" and freeing their industries from corruptive relationships with government. Obviously, some of these countries still have not acquiesced to these demands — and consequently are benefiting far less from the global economy than some of their competitors.How should the beleaguered US catch up, then?
The global market is now demanding a political/cultural shift within the United States. Traditionally, the country has had what one could term a “bipolar” political and economic system based on two dissimilar philosophies: a business philosophy where companies’ decisions are based on where they will reap the biggest rewards, and a governing system that is more plodding and dramatically more ideological.
Globalization is now demanding that if the United States wants to stay in its leadership position, its governing system of elaborate checks and balances must be reformed and must rapidly evolve to a more business-like mode of operating. The U.S. governing system, which is based on concepts that were developed to handle a particular set of 18th century problems, must be updated. Essentially, the market is saying that the black-and-white Thoreauian concept “that government is best which governs least” simply is no longer relevant as an operating principle for the United States in a globalized world.
A new governing paradox has occurred. The old rules of political leadership and coalition-building are changing and are becoming much more complex. The same technology that is driving market integration and demanding more-centralized political leadership is also giving individuals and groups much greater power to question leadership.The sinking US dollar and sagging US stock markets demonstrate a lack of market confidence in America, while pitiable yields on sovereign debt suggest it is turning Japanese. Meanwhile, its gaping trade deficit shows it produces far less goods and services the rest of the world wants than what it wants from elsewhere. I guess it's high time the US practised what it preached. Instead of saying the US is unique among all other nations, it ought to undergo some good old-fashioned structural adjustment. Washington, you're next!
For the United States, two interlinked problems seriously hinder its ability to reform its governing system: the primary system by which political parties choose their nominees, and the Supreme Court’s rulings on political funding. Both have diverted power from the center, from the presidency, to powerful minority factions that are now able to seize power in a way the framers could never have imagined. They now have absolute control over the majority.
Whether it is on issues of taxes, energy, investments, or education, at a time when globalization is calling for immediate action, the U.S. government has become almost catatonic, trapped between the need for leadership and the empowerment of narrow factions. However, like the emerging nations of the late 1990s, if America does not find the will to reform its democracy, then a new fourth branch of government — the globalized marketplace — will do so without the consent of the governed.