Obama Will Encounter A Changed World, Skeptical Of America's Leadership

Miami - My trip to Chile for the Progressive Goverance Conference was my first trip outside the US since Barack Obama's Inaugration.  I was eager to assess the perception of America in these early days after the terrible Bush Presidency.   I offer some initial impressions from my layover in Miami on the way back to DC: 

The Rest Has Risen, and Want a Seat at the Table - From the end of World War II on America's principal export was our governing model, which I characterize as a committment to democracy, free markets,personal liberty and the rule of law.  With the exception of the Middle East, most regions, governments and people of the world are in the process of adapting some version of this model, of course with varying degrees of success.  The embrace of this model, and what might even be called modernity itself, has helped dozens of countries in eastern Europe and the developing world achieve remarkable growth and societal stability and progress.  To paraphrase Fareed Zakaria, we are witnessing a dramatic rise of the rest, something that FDR and Truman I'm sure dreamed of when they constructed the global architecture that has been so instrumental in ushering in this new era.  And for any American who has traveled to these rising regions in recent years it is an exciting thing to behold.  

But this also means-- and I'm not sure American policy elites have really come to terms with this-- that the management of this global architecture is going to have to change to accomodate these new rising powers.  This sentiment is often voiced in policy circles, but how we actually change organizations like the UN, the World Bank and the IMF - and even make meetings like the G20 less a photo-op and more an actual exchange of ideas among diverse peers - is going to be a true test of America and the Obama Administration.  The days of US-European global leadership are over, and the longer global institutions maintain these overt or implicit arrangements, the less relevant these institutions will be to the rising nations who want - and deserve - a seat at the global table.  

Exporting Chaos -The global financial and economic crisis will end up hastening this new  day in global relations.  What I heard in Chile again and again was that the crisis was an Anglo-American export.  That due to our own recklessness, economic hardship had been exported to a rapidly improving world.  For Americans, this sentiment coming on the heels of Bush's unilateralist foreign policy, leaving many to wonder why our great nation which had for so long exported stability, prosperity and modernity was now in the business of exporting chaos.

Prior to my trip to Chile I had assumed that the American people's utter repudiation of the Republican Party, and their choice of a young inspiring leader would help America regain its proper place as the indispensible nation, the moral, economic and political leader of the world.  But now I am not so sure.  First I'm not so sure the rising powers of the world want to return to a world with a paramount sole superpower.  Their goal is to create a much more multi-polar, distributed and arguably democratic set of power arrangements.  This line of thinking may believe that for America to strongly re-assert itself now could very well block the necessary changes which can result in giving these rising powers a bigger seat at the table, gaining the respect and recognition they want and deserve.  

Second, I think many countries, while admiring of our new President, have a right to wonder about what has happened to that old and virtuous America of previous eras.  The America of this past decade has been a blundering reckless superpower, launching a wildly aggressive invasion of another nation, condoning torture, borrowing and spending imprudently, blocking meaningful action on climate change and now exporting a global economic crisis that is doing significant harm to virtually every society in the world.   The performance of America in the Bush era has rightly given many in the world pause, and there simply is no interest in having that America return to power.  At the G20 and the Summit of the Americas, Barack Obama will confront this new global reality, rising powers deeply skeptical of what America has become, hopeful perhaps about this new President, but no longer content to simply blindly accept the Pax Americana that has governed the world for over 60 years.  

At the end of WWII the American government adopted a strategy to defeat totalitarianism and help the decimated and developing world prosper.  We are today seeing the triumph of that strategy, as an overwhelming majority of nations have chosen a modern path and have seen their people lift themselves up.  But now that they have, a great deal of imagination and hard work will be required to design the next series of strategies to help us manage the affairs of the world, building upon what has been a remarkable era of global progress.  That era will almost certainly see a decrease in American power, something that will be terribly difficult for this nation to accept.  Add this new set of daunting global realities to the already significant set of challenges inherited by our remarkable new President, Barack Obama.

Ahead of G-20, Geithner Warns of Deepening Global Recession

From Treasury Sectretary Tim Geithner's remarks yesterday in advance of the G20 Summit in London:

The global recession is deepening. The International Monetary Fund (IMF) has estimated that the global economy is likely to contract by 0.5 percent in 2009. Unemployment is rising and world trade is likely to decline by at least 3 percent and probably more in 2009. Last week's jobs report showed that unemployment in the United States rose to 8.1 percent in February. In the fourth quarter of 2008 we saw the biggest quarterly decline in real U.S. exports since 1971. Our economy needs a revival of global growth to complement the stimulus we are injecting at home. U.S. exports, U.S. jobs and the health of the U.S. economy are inextricably linked to the health and stability of the global economy.

The G-20 countries must take strong macroeconomic and financial sector measures. In the United States, we moved quickly to pass the American Recovery and Reinvestment Act, which lays a foundation for economic recovery through a powerful mix of investments and tax cuts to create jobs and strengthen our long term growth potential. The G-20 countries have also put into place fiscal stimulus. We believe it is important for G-20 nations to commit to substantial and sustained actions for a period that matches the likely duration of the crisis. The IMF has called for countries to put in place fiscal stimulus of 2 percent of aggregate GDP each year for 2009-2010. This is a reasonable benchmark to guide each of our individual efforts. We think the G-20 should ask the IMF to report quarterly on countries' stimulus efforts scaled against the relative shortfall in growth rates.

Forceful financial sector actions are critical to rebuild confidence, restore market functioning, get credit flowing and bring stability to the global financial system. In the United States, we are implementing a series of aggressive initiatives to stabilize and strengthen our financial system to support economic recovery, and we look for complementary actions around the world.

It is important, as well, for each of us to reaffirm commitment to open trade and investment policies, which are essential to global economic growth and prosperity.

As Dr. Robert Shapiro wrote earlier today, only three countries - China, Spain, and the United States - have passed stimulus measures. As Geithner says, global action to stave off economic disaster couldn't be more important right now.

Retooling the Global Economic System

As the frightening impact of the global recession on the less developed world comes into stark relief and the G20 preparing to meet in London early next month, visions for saving the world and restoring global economic order have begun to surface. The New York Times editorial page argues that rich countries are going to need to help poorer ones for their own good:

Helping the developing world is within reach, but it will require capital and concessions from rich countries. The United States and Europe should drop their resistance to a vast new issue of special drawing rights — which like newly printed dollars by the Federal Reserve act as the International Monetary Fund’s own currency.

The United States and Europe also must give more voting power to up-and-coming players. China, in particular, has the financial firepower to become an important contributor to the global effort, yet it will expect more say in the fund’s business.

As the credit crunch spreads, the whole world stands in need of economic stimulus. Poor countries, however, have the resources neither to pay for their own fiscal pump-priming nor to recapitalize foundering banks and reignite the lending to their private sectors. They need outside help. For their own sake, developed countries should provide it. Quickly.

More here.

In in today's Financial Times, Former Australian Prime Minister Paul Keating calls for a permanent, much more empowered G20 and a retooled, representative IMF:

Global financial confidence, once destroyed, requires myr­iad positive events and a heavy convergence of them to counter ambient pessimism and gloom.

The recent series of government packages, notwithstanding their scale and speed, has had little demonstrable effect on the level of confidence or the outlook for ongoing activity. Indeed the number of new and significant packages may begin to peter out out as the public accounts of most countries can no longer cope with the growing burden of insolvency or assume further private sector risk. This context underlines the urgent need for the Group of 20 industrialised and developing nations meeting in London to construct a new paradigm to resuscitate the world financial and economic system.

What is needed is a new global economic and political settlement. The first priority should be to make the G20 a permanent gathering. The leaders should meet at least once a year and, in current circumstances , twice. A permanent G20 structure, representative of the major debtor and creditor countries and the most strategically powerful ones, will sound the death knell of the Group of Seven leading industrialised nations. This is two decades too late, but better late than never.

More here.

Both seem to be on to something. A more representative body for making the global economic rules will ultimately be a good thing, even if letting go to the current order proves difficult. We'll be following this issue closely, both ahead of the London G20 meeting and beyond.

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