Critics would be wrong to write off America, for the country still has a global role, for better or worse
Weekend Today, 18-19 Oct 2008
THINGS are moving so fast in the current financial crisis. Good news brings a sigh of relief, as did the UK, Eurozone and American decisions to use many billions to recapitalise their banks. Then markets shed even more billions overnight.
There is turbulence at the core of the global system. In the weeks and months ahead, the financial uncertainty will impact a weakening economy, bringing losses by companies, in jobs and market portfolios. Leadership and global coordination to respond will be needed, but seem in short supply.
New York, epicentre of the financial turmoil, and the United States seemed stunned and unable to act decisively. The week I visited Manhattan, Lehman collapsed after Finance Secretary Hank Paulson decided not to bail it out.
Dozens of world leaders came to address the United Nations, including US President George Bush. Secretary Paulson then proposed a US$700 billion ($1 trillion) bailout plan to Congress in Washington DC.
But no real leadership emerged. Both New York and Washington DC went instead into gridlock.
In Manhattan, roads were cordoned off to allow convoys of limos and hulking black SUVs with VIPs to pass, while sidewalks spilled over with motley crowds of protesters waving banners.
Inside the UN, addressing the world body for the last time, President Bush struggled to find a coherent theme. He ranged from the financial crisis to Iran’s suspected nuclear weapons programme. The Iranian President retorted that the present financial crisis would mark the end of America’s global role.
As I walked through Grand Central station, I still found a champagne party hosted by a private equity firm in a stylish bar. But the mood in Manhattan has changed. After a decade of heady growth, the party has given way to the hangovers and regrets
of the day after.
New York’s anxiety was not helped by the politics of Washington DC. The bailout proposed by Secretary Paulson was initially rejected. Although subsequently approved, the shrill debate did not help confidence. The politics vented outrage with bank CEOs who have enjoyed fat bonuses and then left the mess for others to clean up. In a near ideological debate between the elite of Wall Street and the average citizens on Main Street, even the credentials of Finance Secretary Paulson were questioned, given his background as a Wall Street insider.
The gap in American leadership was compounded by the near exhaustion of the Bush administration, in its last months in office. It has also become captive to presidential electioneering. Republican candidate John McCain said he wanted to focus on the crisis and so tried to postpone a televised debate with Democratic candidate Barack Obama. That stratagem failed
and, as he falters in the polls, Mr McCain’s campaign has turned to personal attacks.
Few seem to be thinking and acting globally. So while the problem started on Wall Street, the US followed the United Kingdom and Euro economies in the most recent response to recapitalise banks, rather than leading the way.
The Iranian President and other critics would, however, be wrong to write off America. The country still has a global role, for better or worse. There is no ready alternative and no global system to govern the global economy. Major central banks around the world concertedly injected funds into their markets, but to no effect.
The UN has no role despite convening in New York when Lehman collapsed. Little has been heard from the International Monetary Fund, although it is charged to oversee the global financial system. The UK and Eurozone economies did take a bold initiative to recapitalise their banks. But the market seems to judge this as insufficient to restore trust and stability, and it is not clear Europe can and will provide ready leadership to deal with further turbulence.
Different countries must coordinate to contain and govern what is a global problem. Asia too must ready itself.
But any durable and workable solution must involve America. Whether it will be Mr Obama or Mr McCain, a new President will soon come into office. He will find that fundamentals about the market, government roles and regulation have been transformed.
It is uncertain what America will do. But before Americans do anything, they will debate. That debate will also be about New York and Capitol Hill, Wall Street and Main Street, free market and regulation, Republican and Democrat, US and the rest of the world. The debate will be full and loud, and on American terms.
The rest of us won’t get a vote. Unless efforts are made, we will not even get much voice in that debate. We are like the crowds on the New York sidewalks outside the UN. We can protest. Or, like me, we can try to get on with our lives, and find a cab to take me downtown, to Wall Street. We will live with the consequences, and there are things that we in Asia and Asean can do.