A new world order

Newsweek International's Robert Samuelson has an interesting article online. He proposes that the US is losing its hold on the global economy, differentiating power from leadership. The article situates the present American economy with those of other first world nations and provides support for the long-time standing of the US as an economic power. However, as Samuelson writes:

[L]eadership is the ability to set and achieve goals, either byimposing your will or by getting others to follow. Time was when the United States could do this easily....Times have changed. In its general foreign policy, the Bush administration may seem unilateralist. But on economic matters it has suffered a loss of influence that, frankly, continues a trend. Ironically, it stems partly from the success of American ideas.

Interesting point. How exactly? Samuelson enumerates the following factors:

1. Globalization By introducing and embracing the concept, Samuelson posits that the US allowed its leadership to be challenged by new and emerging economic centers, all competing for a share in global trade and commerce. The result is a fragmentation of influence, leading to erosion and possible loss of leadership standing.




• US current-account deficits These have been increasing "explosively," according to Samuelson's sources, and could very well lead to a "crisis in confidence" in the US dollar, locally and globally.


• Imports v. exports The US economy is seen to be growing faster than those of Europe and Japan. As a result, the US is now importing more than what it is exporting.


• Global trade negotiations These have weakened the US' position in calling the shots in global trade. In fact, due to the emergence of new economic centers, the US has been compelled to give in to more and more trade concessions. And the Bush administration's foreign policy, especially its decisions on the Iraq war, has not helped one bit. In fact, Samuelson goes on to say that it has worsened the situation.




2. Disappearance of poitical supports Traditionally, the following have made it possible for the US to lead global trade:




1. The Cold War Trade and defense went hand in hand to defeat communism. It was a unified effort to put up a showcase of the advantages of democracy and capitalism. The US position was strengthened by allies who turned to the US only because the alternative was so much more despicable. A classic case of choosing the lesser evil.


2. US & international economic organizations Although the US still dominates the IMF, the World Bank and the WTO, UN figures for 2003 show that direct private investments in developing countries have outpaced those of international economic organizations by almost 9 to 1, in billions of dollars. There is, therefore, less infuence through these organizations.


3. Public opinion Americans are now more concerned with job security as a result of globalization. More and more American companies are into "offshoring." Apparently, this index is so high that the US Congress has refused to grant the Presidency broader overseas trade-negotiating powers.




3. China Asian countries have refused to revalue their currencies. There is neither an apparent nor urgent need to do so, given the globalization of trade. Also, there is a perceived threat from cheap Chinese imports. With the lower cost of labor in Asia, there is a worldwide trend for manufacturing companies to relocate their factories there, and the American corporate culture is not immune. Hence, the increased fear of "offshoring" and China.

The analysis is logical. So far. I don't agree with Samuelson's conclusion, though, that:

as much as American leadership has often been resent-ed (sic), it might be regretted if it's no longer there. The globalized economy is a work in progress, and if it disintegrates into a melee of unsupervised markets and contentious nations, people may recall nostalgically the days when they nosily complained about Washington's overbearing leadership.

I don't believe that the global economy as we have it now will disintegrate, or that there is a danger of disintegration, given the presence of the EU and the ASEAN. I strongly believe that these bodies will eventually, perhaps in the nearer future than we imagine, rise to supervise and regulate trade relations between and among regional economies.

As a consequence of the rise of China as the leading economic power, I believe that an Asian economy will be inevitable. Already, the ASEAN has gained significant footholds in ensuring that such regional cooperation will take place, not only in trade but in defense as well. It would be interesting to monitor this relationship between trade and defense among Asian nations. And should this arise, how would Australia position herself? There are strong indications that that country will align herself with Asia and not with the US. (See related Newsweek article. In fact, Alexander Downer is quoted, showing his characteristic un-Foreign-Ministerial self. Delicious!) So much for the Sheriff of Asia.

In all, Samuelson exhibits the arrogance of American culture. It simply refuses to recognize the inevitable demise of American leadership in the world. She has become the old world, while Europe and Asia have been quietly building the new.