But things are changing. One of those things, which most of the world up until now has lived on, is a certain economic dependence on the US. A poor country like Brazil would provide raw materials in exports, and import about everything else. The exchange was not very even-handed, and the big economy, namely the US, would name its price on everything from coffee to rubber to sugar.
Writing in Vanity Fair, Nobel Prize winner Joseph Stieglitz discusses how the Thirld World may view the future of their relations with the US. As he writes: In much of the world, however, the battle between capitalism and socialism—or at least something that many Americans would label as socialism—still rages. While there may be no winners in the current economic crisis, there are losers, and among the big losers is support for American-style capitalism...Colonialism left a mixed legacy in the developing world—but one clear result was the view among people there that they had been cruelly exploited.
Stieglitz makes a startling point when he describes how many of the same people who were put in charge of dealing with the crisis in Asia in the 1990s are now trying to get the US out of the huge hole it got itself into...a hole created by the same policies that the US hel over countries like Argentina and Brazil. The hypocrisy is not going unnoticed around the developing world.
The contrast between the handling of the East Asia crisis and the American crisis is stark and has not gone unnoticed. To pull America out of the hole, we are now witnessing massive increases in spending and massive deficits, even as interest rates have been brought down to zero. Banks are being bailed out right and left. Some of the same officials in Washington who dealt with the East Asia crisis are now managing the response to the American crisis. Why, people in the Third World ask, is the United States administering different medicine to itself?
Many in the developing world still smart from the hectoring they received for so many years: they should adopt American institutions, follow our policies, engage in deregulation, open up their markets to American banks so they could learn “good” banking practices, and (not coincidentally) sell their firms and banks to Americans, especially at fire-sale prices during crises. Yes, Washington said, it will be painful, but in the end you will be better for it.It isn`t as if all of these countries don`t want to America back on its feet. They have seen, as he writes, 200 million of the world move into poverty as a direct consequence of the crisis. But what they aren`t so keen on is the need to revert to some American-led paradigm in the future. And they are already changing the way they do things. From China to Brazil, countries in the developing world are taking concrete steps to de-link from the US, and create their own power structures.
As Stieglitz writes: We are no longer the chief source of capital. The world’s top three banks are now Chinese. America’s largest bank is down at the No. 5 spot. The dollar has long been the reserve currency—countries held the dollar in order to back up confidence in their own currencies and governments. But it has gradually dawned on central banks around the world that the dollar may not be a good store of value.
These steps are not what really worries Stieglitz, however. As he writes, he is more concerned about ideas. These countries may just give up on any concept of market economy: The former Communist countries generally turned, after the dismal failure of their postwar system, to market capitalism, replacing Karl Marx with Milton Friedman as their god. The new religion has not served them well. Many countries may conclude not simply that unfettered capitalism, American-style, has failed but that the very concept of a market economy has failed, and is indeed unworkable under any circumstances. Old-style Communism won’t be back, but a variety of forms of excessive market intervention will return. And these will fail. The poor suffered under market fundamentalism—we had trickle-up economics, not trickle-down economics. But the poor will suffer again under these new regimes, which will not deliver growth. Without growth there cannot be sustainable poverty reduction. There has been no successful economy that has not relied heavily on markets. Poverty feeds disaffection. The inevitable downturns, hard to manage in any case, but especially so by governments brought to power on the basis of rage against American-style capitalism, will lead to more poverty. The consequences for global stability and American security are obvious.
If, as he writes, there is not faith or trust in the overall system of trade and interconnectedness, or some some sense of shared values, things will not get better. If the US preeaches anti-protectionism, but puts made in USA clauses in proposals, nothing will improve. Countires around the world will close their doors to each other, and according to Stieglitz, democracy itself will be the next victim: In the developing world, people look at Washington and see a system of government that allowed Wall Street to write self-serving rules which put at risk the entire global economy—and then, when the day of reckoning came, turned to Wall Street to manage the recovery. They see continued re-distributions of wealth to the top of the pyramid, transparently at the expense of ordinary citizens. They see, in short, a fundamental problem of political accountability in the American system of democracy. After they have seen all this, it is but a short step to conclude that something is fatally wrong, and inevitably so, with democracy itself.
Brazil, in a specific example, exports only about 12% of its goods to the US. It has suffered much less than other countries around the world. It seems to have learned lessons that the US taught, but never took to heart. How can American companies, and its government expect the world to take anything that comes with made in USA at face value?
