Fage
10-05-2008, 08:17 AM
The debilitating credit crisis has knocked the U.S. from its perch as the supreme economic power. The climb back up will be steep
KEVIN CARMICHAEL
October 4, 2008
OTTAWA -- Before U.S. Treasury Secretary Henry Paulson was pressed into becoming the fire chief of the financial crisis, he had a good thing going as an economic missionary.
Basking in what he liked to call "the strongest global economy" of his business lifetime, Mr. Paulson, who joined President George W. Bush's administration in June, 2006, embraced with zeal an aspect of his new job with roots in Cold War diplomacy.
In his two years as Treasury Secretary before financial markets came totally unhinged this summer, Mr. Paulson conducted more official business in China than he did in New York. He has visited as many cities in Latin America as he has cities in the United States of America. He rolled through Calcutta, New Delhi and Mumbai in three days in October, 2007; two weeks later, he spent five days in Africa.
The places changed, but the message stayed the same: American-style banking, unencumbered by regulation and open to U.S. financial institutions, is the surest way to create wealth.
"An open, competitive and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than government intervention," Mr. Paulson told an auditorium full of officials in Shanghai in March, 2007.
Mr. Paulson's brand of capitalism isn't promoting much stability these days, and prosperity isn't a word that jumps to mind as policy makers from Canada to Japan to France scramble to avert a global economic recession.
The Made in America financial crisis has seriously undermined the U.S.'s standing as the undisputed leader of the international economy, posing the first serious threat to U.S. hegemony since the height of the Soviet Union.
After decades of strong-arming governments in Asia, Latin America and Eastern Europe to keep the state out of the economy, the U.S. government in September put up $285-billion (U.S.) to nationalize mortgage giants Fannie Mae and Freddie Mac and insurer American International Group Inc.
That's nothing compared with the $700-billion Mr. Paulson got from Congress yesterday to purge the financial system of the bad debt at the root of the credit crisis. With governments saving failing banks in Europe, stock markets plunging in China and exports slowing in Brazil, the world is in no mood to take economic lessons from the U.S. government.
"There is a real element of anger and frustration around the planet that this is a U.S.-originated problem with global repercussions," John Manley, a finance and foreign affairs minister under former prime minister Jean Chrétien, said in an interview. "The world will be looking for a loss of hubris from the United States as a result of this."
America has dominated global economic affairs virtually unopposed since the collapse of the Berlin Wall, an era marked by the acceleration of global free-trade agreements, the confirmation of the dollar as the world's de facto currency, and the rise of Wall Street as the world's financial centre.
The U.S. and Britain dictated the Bretton Woods agreement in 1944, establishing the International Monetary Fund and the World Bank. The U.S. became the largest shareholder in the global institutions, which built their headquarters side by side in Washington. Unsurprisingly, the American vision of private ownership and unfettered markets dominated the prescriptions those agencies imposed on weaker economies in return for financial aid. That culminated in the Washington Consensus, a term coined in the 80s to encompass policies such as privatization, lower taxes and deregulation.
These days, countries can't distance themselves fast enough from the Washington way of economic management.
"The world is on the edge of the abyss because of an irresponsible system," French Prime Minister François Fillon said on the eve of a gathering of European Union leaders to discuss the financial turmoil.
German Finance Minister Peer Steinbrueck predicted the end of the U.S.'s status as the "superpower of the global financial system." Chinese officials are rethinking their embrace of globalization, and Colombian President Alvaro Uribe said the U.S. must ensure the situation doesn't get any worse.
"The Anglo-American model has suffered a big setback," John Snow, who preceded Mr. Paulson as treasury secretary and is now chairman of private equity firm Cerberus Capital Management, said in an interview. "We don't have the moral authority we might have had a few years ago to get others to follow our model."
Other nations appear ready to assume a more assertive role in the global economy.
Continued on Page 2 (http://www.theglobeandmail.com/servlet/story/LAC.20081004.RHEGEMONY04/TPStory/Business/?pageRequested=2)…
Source:http://www.theglobeandmail.com/servlet/story/LAC.20081004.RHEGEMONY04/TPStory/Business
KEVIN CARMICHAEL
October 4, 2008
OTTAWA -- Before U.S. Treasury Secretary Henry Paulson was pressed into becoming the fire chief of the financial crisis, he had a good thing going as an economic missionary.
Basking in what he liked to call "the strongest global economy" of his business lifetime, Mr. Paulson, who joined President George W. Bush's administration in June, 2006, embraced with zeal an aspect of his new job with roots in Cold War diplomacy.
In his two years as Treasury Secretary before financial markets came totally unhinged this summer, Mr. Paulson conducted more official business in China than he did in New York. He has visited as many cities in Latin America as he has cities in the United States of America. He rolled through Calcutta, New Delhi and Mumbai in three days in October, 2007; two weeks later, he spent five days in Africa.
The places changed, but the message stayed the same: American-style banking, unencumbered by regulation and open to U.S. financial institutions, is the surest way to create wealth.
"An open, competitive and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than government intervention," Mr. Paulson told an auditorium full of officials in Shanghai in March, 2007.
Mr. Paulson's brand of capitalism isn't promoting much stability these days, and prosperity isn't a word that jumps to mind as policy makers from Canada to Japan to France scramble to avert a global economic recession.
The Made in America financial crisis has seriously undermined the U.S.'s standing as the undisputed leader of the international economy, posing the first serious threat to U.S. hegemony since the height of the Soviet Union.
After decades of strong-arming governments in Asia, Latin America and Eastern Europe to keep the state out of the economy, the U.S. government in September put up $285-billion (U.S.) to nationalize mortgage giants Fannie Mae and Freddie Mac and insurer American International Group Inc.
That's nothing compared with the $700-billion Mr. Paulson got from Congress yesterday to purge the financial system of the bad debt at the root of the credit crisis. With governments saving failing banks in Europe, stock markets plunging in China and exports slowing in Brazil, the world is in no mood to take economic lessons from the U.S. government.
"There is a real element of anger and frustration around the planet that this is a U.S.-originated problem with global repercussions," John Manley, a finance and foreign affairs minister under former prime minister Jean Chrétien, said in an interview. "The world will be looking for a loss of hubris from the United States as a result of this."
America has dominated global economic affairs virtually unopposed since the collapse of the Berlin Wall, an era marked by the acceleration of global free-trade agreements, the confirmation of the dollar as the world's de facto currency, and the rise of Wall Street as the world's financial centre.
The U.S. and Britain dictated the Bretton Woods agreement in 1944, establishing the International Monetary Fund and the World Bank. The U.S. became the largest shareholder in the global institutions, which built their headquarters side by side in Washington. Unsurprisingly, the American vision of private ownership and unfettered markets dominated the prescriptions those agencies imposed on weaker economies in return for financial aid. That culminated in the Washington Consensus, a term coined in the 80s to encompass policies such as privatization, lower taxes and deregulation.
These days, countries can't distance themselves fast enough from the Washington way of economic management.
"The world is on the edge of the abyss because of an irresponsible system," French Prime Minister François Fillon said on the eve of a gathering of European Union leaders to discuss the financial turmoil.
German Finance Minister Peer Steinbrueck predicted the end of the U.S.'s status as the "superpower of the global financial system." Chinese officials are rethinking their embrace of globalization, and Colombian President Alvaro Uribe said the U.S. must ensure the situation doesn't get any worse.
"The Anglo-American model has suffered a big setback," John Snow, who preceded Mr. Paulson as treasury secretary and is now chairman of private equity firm Cerberus Capital Management, said in an interview. "We don't have the moral authority we might have had a few years ago to get others to follow our model."
Other nations appear ready to assume a more assertive role in the global economy.
Continued on Page 2 (http://www.theglobeandmail.com/servlet/story/LAC.20081004.RHEGEMONY04/TPStory/Business/?pageRequested=2)…
Source:http://www.theglobeandmail.com/servlet/story/LAC.20081004.RHEGEMONY04/TPStory/Business