Walter Russell Mead: Why the recession bolstered America
[Walter Russell Mead is the Henry A. Kissinger Senior Fellow in U.S. Foreign Policy at the Council on Foreign Relations and the author of God and Gold: Britain, America and the Making of the Modern World. Lauren Gottlieb provided research assistance for this article.]
Even before the Panic of 2008 sent financial markets into turmoil and launched what looks like the worst global recession in decades, talk of American decline was omnipresent. In the long term, the United States faces the rise of Asia and the looming fiscal problems posed by Medicare and other entitlement programs. In the short term, there is a sense that, after eight years of George W. Bush, the world, full of disdain for our way of life, seems to be spinning out of our--and perhaps anybody's--control. The financial panic simply brought all that simmering anxiety to a boil, and the consensus now seems to be that the United States isn't just in danger of decline, but in the full throes of it--the beginning of a "post-American" world.
Perhaps--but the long history of capitalism suggests another possibility. After all, capitalism has seen a steady procession of economic crises and panics, from the seventeenth-century Tulip Bubble in the Netherlands and the Stop of the Exchequer under Charles II in England through the Mississippi and South Sea bubbles of the early eighteenth century, on through the crises associated with the Napoleonic wars and the spectacular economic crashes that repeatedly wrought havoc and devastation to millions throughout the nineteenth century. The panics of 1837, 1857, 1873, 1893, and 1907 were especially severe, culminating in the Great Crash of 1929, which set off a depression that would not end until World War II. The series of crises continued after the war, and the last generation has seen the Penn Central bankruptcy in 1970, the first Arab oil crisis of 1973, the Third World debt crisis of 1982, the S&L crisis, the Asian crisis of 1997, the bursting of the dot-com bubble in 2001, and today's global financial meltdown.
And yet, this relentless series of crises has not disrupted the rise of a global capitalist system, centered first on the power of the United Kingdom and then, since World War II, on the power of the United States. After more than 300 years, it seems reasonable to conclude that financial and economic crises do not, by themselves, threaten either the international capitalist system or the special role within it of leading capitalist powers like the United Kingdom and the United States. If anything, the opposite seems true--that financial crises in some way sustain Anglophone power and capitalist development.
Indeed, many critics of both capitalism and the "Anglo-Saxons" who practice it so aggressively have pointed to what seems to be a perverse relationship between such crises and the consolidation of the "core" capitalist economies against the impoverished periphery. Marx noted that financial crises remorselessly crushed weaker companies, allowing the most successful and ruthless capitalists to cement their domination of the system. For dependency theorists like Raul Prebisch, crises served a similar function in the international system, helping stronger countries marginalize and impoverish developing ones.
Setting aside the flaws in both these overarching theories of capitalism, this analysis of economic crises is fundamentally sound--and especially relevant to the current meltdown. Cataloguing the early losses from the financial crisis, it's hard not to conclude that the central capitalist nations will weather the storm far better than those not so central. Emerging markets have been hit harder by the financial crisis than developed ones as investors around the world seek the safe haven provided by U.S. Treasury bills, and commodity-producing economies have suffered extraordinary shocks as commodity prices crashed from their record, boom-time highs. Countries like Russia, Venezuela, and Iran, which hoped to use oil revenue to mount a serious political challenge to American power and the existing world order, face serious new constraints. Vladimir Putin, Hugo Chavez, and Mahmoud Ahmadinejad must now spend less time planning big international moves and think a little bit harder about domestic stability. Far from being the last nail in America's coffin, the financial crisis may actually resuscitate U.S. power relative to its rivals....
Read entire article at New Republic
Even before the Panic of 2008 sent financial markets into turmoil and launched what looks like the worst global recession in decades, talk of American decline was omnipresent. In the long term, the United States faces the rise of Asia and the looming fiscal problems posed by Medicare and other entitlement programs. In the short term, there is a sense that, after eight years of George W. Bush, the world, full of disdain for our way of life, seems to be spinning out of our--and perhaps anybody's--control. The financial panic simply brought all that simmering anxiety to a boil, and the consensus now seems to be that the United States isn't just in danger of decline, but in the full throes of it--the beginning of a "post-American" world.
Perhaps--but the long history of capitalism suggests another possibility. After all, capitalism has seen a steady procession of economic crises and panics, from the seventeenth-century Tulip Bubble in the Netherlands and the Stop of the Exchequer under Charles II in England through the Mississippi and South Sea bubbles of the early eighteenth century, on through the crises associated with the Napoleonic wars and the spectacular economic crashes that repeatedly wrought havoc and devastation to millions throughout the nineteenth century. The panics of 1837, 1857, 1873, 1893, and 1907 were especially severe, culminating in the Great Crash of 1929, which set off a depression that would not end until World War II. The series of crises continued after the war, and the last generation has seen the Penn Central bankruptcy in 1970, the first Arab oil crisis of 1973, the Third World debt crisis of 1982, the S&L crisis, the Asian crisis of 1997, the bursting of the dot-com bubble in 2001, and today's global financial meltdown.
And yet, this relentless series of crises has not disrupted the rise of a global capitalist system, centered first on the power of the United Kingdom and then, since World War II, on the power of the United States. After more than 300 years, it seems reasonable to conclude that financial and economic crises do not, by themselves, threaten either the international capitalist system or the special role within it of leading capitalist powers like the United Kingdom and the United States. If anything, the opposite seems true--that financial crises in some way sustain Anglophone power and capitalist development.
Indeed, many critics of both capitalism and the "Anglo-Saxons" who practice it so aggressively have pointed to what seems to be a perverse relationship between such crises and the consolidation of the "core" capitalist economies against the impoverished periphery. Marx noted that financial crises remorselessly crushed weaker companies, allowing the most successful and ruthless capitalists to cement their domination of the system. For dependency theorists like Raul Prebisch, crises served a similar function in the international system, helping stronger countries marginalize and impoverish developing ones.
Setting aside the flaws in both these overarching theories of capitalism, this analysis of economic crises is fundamentally sound--and especially relevant to the current meltdown. Cataloguing the early losses from the financial crisis, it's hard not to conclude that the central capitalist nations will weather the storm far better than those not so central. Emerging markets have been hit harder by the financial crisis than developed ones as investors around the world seek the safe haven provided by U.S. Treasury bills, and commodity-producing economies have suffered extraordinary shocks as commodity prices crashed from their record, boom-time highs. Countries like Russia, Venezuela, and Iran, which hoped to use oil revenue to mount a serious political challenge to American power and the existing world order, face serious new constraints. Vladimir Putin, Hugo Chavez, and Mahmoud Ahmadinejad must now spend less time planning big international moves and think a little bit harder about domestic stability. Far from being the last nail in America's coffin, the financial crisis may actually resuscitate U.S. power relative to its rivals....