A grim view from abroad on America’s economic predicament from John Gray in The Guardian today:
Our gaze might be on the markets melting down, but the upheaval we are experiencing is more than a financial crisis, however large. Here is a historic geopolitical shift, in which the balance of power in the world is being altered irrevocably. The era of American global leadership, reaching back to the Second World War, is over. … In a change as far-reaching in its implications as the fall of the Soviet Union, an entire model of government and the economy has collapsed.
Gray says that at the same time America has been lecturing countries around the globe on the necessity of sound finance, we have been borrowing on a colossal scale to finance tax cuts and fund our over-stretched military commitments.
The populist rant about greedy banks that is being loudly ventilated in Congress is a distraction from the true causes of the crisis. The dire condition of America’s financial markets is the result of American banks operating in a free-for-all environment that these same American legislators created. … The irony of the post-Cold War period is that the fall of communism was followed by the rise of another utopian ideology. In American and Britain, and to a lesser extent other Western countries, a type of market fundamentalism became the guiding philosophy. The collapse of American power that is underway is the predictable upshot. Like the Soviet collapse, it will have large geopolitical repercussions. An enfeebled economy cannot support America’s over-extended military commitments for much longer. Retrenchment is inevitable and it is unlikely to be gradual or well planned. Meltdowns on the scale we are seeing are not slow-motion events. They are swift and chaotic, with rapidly spreading side-effects.
Gray says those countries that spurned the American model of capitalism — “China in particular” — will shape our economic future.
Having created the conditions that produced history’s biggest bubble, America’s political leaders appear unable to grasp the magnitude of the dangers the country now faces. Mired in their rancorous culture wars and squabbling among themselves, they seem oblivious to the fact that American global leadership is fast ebbing away. A new world is coming into being almost unnoticed, where America is only one of several great powers, facing an uncertain future it can no longer shape.