A delayed 4th of July comment
There might have been fireworks, flags, parades and celebrations, but it was a hot and dark 4th of July for many living in the heart of the mighty United States of America.
Meanwhile, more bad news emerged not only for those in Washington, D.C., but for all Americans and maybe for everybody in the world. The International Monetary Fund has warned that tax hikes and spending cuts are putting the U.S. economy at risk and that the country could be pushed back into recession; the annual review of the U.S. economy adds that this could also be a devastating blow to the world economy.
While slashing its forecast on global growth, the IMF also lowered its estimate of U.S. growth for this year from 2.1 percent to 2.0 percent. This might seem like a marginal cut, but when the size of the U.S. economy is considered, it is an important discount. For the time being, the forecast for the next year is even a negative figure. It is quite interesting to observe that after many months, the IMF pointed to the European problem as a global risk and a threat to the U.S. economy but is now suggesting that a potential U.S. recession poses a threat to Europe.
Last month in the Financial Times, Martin Wolf asked a very interesting question: “Is the future role of the United States in its own hands?” The answer is also quite interesting: “Yes, but only up to a point; the United States can control what it does, but it can not control what others do.” Is this conjecture true?
After the Soviet empire collapsed, a new wave of sympathy for the United States was awakened. However, after people soon grasped that the United States had become the only superpower, the old-fashioned allergy against America’s supremacy began to spread again among Europeans.
But contrary to its traditional and historical efforts to try to reduce this allergy, U.S. administrations over the past decade appeared to choose to stay passive or even act to create the impression that they did not care. As a result, a new sympathy stemming from Sept. 11 began to erode again. The recent crisis that started in the United States magnified the negative views of American financial and even political institutions.
For some Americans, all these matters might not be very important. At least their country, in spite of the recent crisis, is still a superpower that does not need anybody’s sympathy. However, the problems in the world economy and world politics, coupled with bloody wars in various parts of the world that do not seem to be nearing any end, show that the reality is quite different.
In every country – a superpower is no exception – it is acceptable that domestic political, social and economic problems such as poverty and unemployment are the priority. Around 45 million Americans are living below the poverty line. It means that 15 percent of the total population is poor and getting poorer according to statistical estimates. The reason for the recent deterioration in income distribution is obviously the rise in unemployment.
Nobody can underestimate the importance of the political pressure created by these problems on the American administration during an election year. However, lessons from history show that even a superpower cannot solve all problems, even some domestic ones, without worldwide cooperation. To listen only to the ideas of familiar circles while underestimating the wisdom of that which is unfamiliar is unwise.
The 21st century might not be the “era of a diminished superpower” as Martin Wolf indicated in his column. However, Americans must now comprehend what the former chairman of the Federal Reserve Bank, Alan Greenspan, said years ago, namely, that the United States of America is no longer an oasis of prosperity or a shelter for refugees who are seeking help to solve their financial troubles.
Nevertheless, even when the IMF, as well as some important institutions, makes pessimistic projections for the American economy, a majority of the business world remain more optimistic for next year based on their experiences on past post-election periods.