| | |  Editorials | Opinions | September 2008 
How Can the World Take Us Seriously?
 Andres Martinez - Washington Post
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Dear Stumped:
Isn't Washington's socialistic takeover of financial sector going to make it impossible for next president to be taken seriously by rest of world on economic issues?
- Juana Ortz
Dear Juana:
It's been astonishing to watch our government leaders re-write the basic rules of capitalism on the fly, spending hundreds of billions of dollars while they're at it. It brings to mind college all-nighters - spent at Kinko's trying to get our student magazine out, or working on a grad school applications. Except that instead of overly caffeinated students winging it, we've got the stewards of the world's foremost economy yelling at each over their pizza slices: "Hey, I know, what if we just ban the shorting of stocks?" (You think they considered outlawing bad news?)
To your point, I can appreciate how bad this all looks overseas. Not long ago, when Mexico, Argentina and Russia imploded, we worried about the "contagion" effects from mismanaged markets. Now we just have to look in the mirror to see the latest mismanaged nation to wreak havoc on world markets.
The hypocrisy issue will undercut our global leadership - but the hypocrisy that got us into this mess, more than the hypocrisy inherent in all these bailouts.
Facing the prospect of a total meltdown of its banking sector, any government will step in to intervene, every time, regardless of political fallout or concerns about moral hazard.
But, if you'll indulge me another analogy, for foreigners, watching the U.S. navigate the credit meltdown has been a bit like catching your parents with weed, after years of their preaching about not doing drugs. We aren't talking actual drugs here, of course, but the addiction to living beyond one's means, on the edge, squeezing that last borrowed dollar out of China to live large - be it by supersizing at McDonald's, going "venti" at Starbucks, building a McMansion on steroids, taking a lavish family vacation, or splurging on that timeshare by the beach.
For decades, U.S. administrations and their surrogates at the International Monetary Fund and World Bank have been telling developing nations around the world to eat their economic spinach - to balance their budgets, open their markets to the outside world, respect the rules of the market without interference and live within their means... or else.
But Americans themselves have never been eager to live by what many in Latin America disparagingly call "the Washington consensus." The U.S. flouts the fiscal and trade policy orthodoxies it preaches to everyone else with impunity. And to outsiders, it seems that the superpower in control of the world's reserve currency never has to face an "or else" moment of reckoning. Certainly not this past week.
Washington's determination to spare Wall Street and the American public the fallout of their reckless behavior strikes foreigners who have heard Washington's lecture about the virtues of free markets as especially cheeky. Everyone knew there was a housing bubble, driven in part by overzealous speculation and wishful thinking, and that Wall Street was overleveraged. Imagine how much grief a debt-ridden developing nation would receive from the IMF for a raft of proposals to keep homeowners in place, or to keep investment banks alive.
It's difficult for foreigners to really gloat at our misfortune, because we are likely their best customer and because when our economy catches a cold, it still has a negative impact on other economies. The Russian market, for instance, sunk about 20 percent last week before the Kremlin called a trading time-out.
Still, they might admonish Uncle Sam to have a taste of his own medicine, and to engage in some soul-searching during the coming hangover. |
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