Today the world is tottering towards an economic abyss.
Though most of the economists tend to place the blame on Greece and Europe, what I think is missing in this whole smoking cauldron is simply one thing the world has been missing for quite a while.
What is that you may ask ?
I would simply put that as American Leadership.
Be it in domestic policy issues or international policy making, the U.S. has been lagging behind the Asian countries for a while. The decline started two years ago and is persisting in the midst of the global gloom engulfing the world today. Had it been successful in resolving the domestic economic challenges in the aftermath of the global crisis spawned by the bankruptcy of Lehman Brothers, that would have translated to greater economic benefit for the entire world.
Instead the new President of the U.S. got lost in multiple challenges facing the economy, rising unemployment, the war in Afghanistan, and a multitude of other issues. The promises that he made during the campaign were not kept. The Republicans defeated the President on every major policy matter, especially on the deficit financing.
While Europe made its own share of mistakes and countries continued to live beyond their means, the U.S. should have stepped in and firmly advised Europe not to let Greece, Italy, Portugal and Spain further aggravate the already fragile economic situation in the world. It should have done it in the same manner as it would have supported Europe in the NATO alliance. Europe did not have firm leadership and no body wanted to antagonise the powerful head of the European Central Bank. Was this any different from the way in which the IMF and the World Bank advised Asian economies in the aftermath of the Asian economic crisis of 1998 ?
Why are we not learning ?
At the end of the day, governments are getting replaced, new leaders are coming into play (albeit temporarily, as no one knows how long they are going to last), and the coffers are empty. If 3 of the key nations of Europe go down the tube, who is responsible – especially for slow decision-making which has been the cause of the problems becoming huge day after day ?
I strongly believe that the U.S. Federal Reserve and the U.S. President should have played a much more impactful role in arresting the decline of Europe, which is not only in the interest of the U.S. but also of the whole world. With the result of inaction acting like slow poison, today we have arrived at an unstable world where China is fast becoming the economic leader.
As against the past practice of economy following politics, we might have the issue now of politics following economics, which if you really care to think about it, is not palatable. You would not want an economic autocracy, or freedom of expression replaced by economic slavery. All this has almost come to pass due to sheer lack of political leadership in the West, especially the U.S.
So at the end of the day, the world needs firm and generous U.S. leadership to guide the world out of its problems. It might be too much to ask for when the U.S. is having serious economic troubles of its own. But the world does not seem to be having any other good choice today.
27th November 2011