Wednesday, September 16, 2009
Last night, after BBC World News America, they ran a program entitled Aftershock. It was a look back at the beginning of the Great Recession -- one year after the fall of Lehman Brothers. During the middle of the program, it occurred to me that history is repeating itself.
One of the things that I don’t think we Americans fully comprehend yet is how much this is going to cost us in terms of prestige. Just 18 years after we won the Cold War -- 18 years of unquestioned American military and economic supremacy -- we have witnessed the second failure of capitalism. At least America’s form of capitalism. Eleven years after World War I, the Great Depression left the impression that Communism might be a viable alternative to our form of government. The Soviet Union -- which had already suffered terribly in its founding revolution -- was relatively unscathed by the Great Depression. Today, China is becoming that alternative model.
There is no Republican Party in China so when China decided to go with a stimulus plan, they spent big. It helps that they didn’t have to borrow theirs like we did. The numbers vary slightly (currency conversions, different methodologies, etc.) but China spent (or is spending) between 15-20 percent of their GDP. If America had the same size stimulus, it would be well over $2 trillion dollars.
During the Great Depression, America built the Hoover Dam. During the Great Recession, China is building the Great Drain (video). It all appears to be working -- at least for now. China’s 7.9% second quarter growth in GDP looks a lot more attractive than our 1% decline.
Our unregulated, greed-induced disaster may have given the world the impression that America’s form of capitalism isn’t the undeniable model to choose for their country’s future. There may be another form of government that might work better for them. The last time the world got that impression we had a 46-year-long ideological struggle called The Cold War. And if you’ll remember, it almost got out of hand a few times.
There’s no doubt in anyone’s mind that America’s form of government was the winner in the past. What people are wondering now is what will be the winning form of government in the future. And there are a lot of people in the world -- people that lost their job or went hungry because of this American-induced disaster -- that won’t be rooting for America.
Post Script: After writing the above this morning, I was listening to the Marketplace podcast from Monday. I thought this exchange worth adding to this post.
”RYSSDAL: What happens, though, if we don't get some kind of substantive reform?
BLACK: You will have a continuation of the crisis. If you adopted everything in President Obama's suggested reform, none of it would have stopped the current crisis. And it's certainly not going to be passed in full. And it won't stop the coming crisis. What we've done in creating these systematically dangerous banks, where the failure of any one of them can take down the whole system, has made the coming crisis much worse. So a broad range of economists, from conservatives to progressives, are very disturbed about the path that we're following. “
September 16, 2009