ANALYSIS: Financial crisis belies myth of U.S. independence

Edward Goldberg

Published on October 30 2008
© 2008 - The Washington Times

The ongoing financial crisis defines globalization, good or bad. It is a clear demonstration of how money flows have surpassed the power of individual countries to govern them.

And it is also a demonstration of the reality of nearly 37 years of financial globalization and how a housing crisis in the United States dramatically can undermine the world's economy.

Since President Richard M. Nixon suspended the convertibility of the dollar to gold, thus unknowingly became one of the fathers of financial globalization, the United States gradually has become less financially independent. Yet the myth of our financial independence - that we are free to pick and choose our way through globalization - has dominated the ideology of the Bush administration.

Clinging to the combined and sometimes conflicting myths of financial independence, American exceptionalism and laissez-faire capitalism, the Bush administration never explained or tried to educate the American people about how the world has changed economically.

Thus, when it was crucial for President Bush's own party to vote for legislation to help save the American banking system, Republican members of Congress did not have a language to use to explain their vote to their constituents back home. The only language available was the negative repeating of the old refrain that the bailout bill would take money from hardworking small-town America and send it to the crooks on Wall Street.

The bailout votes defined the disparity in America between the factual forces of globalization and the myth of the American small town. Alaska Gov. Sarah Palin, the Republican vice-presidential nominee, can campaign day and night proclaiming the sanctity of the American small town, but the reality is very different. The small town as an economic unit is not, if it ever was, independent of financial decisions made thousands of miles away.

From the beginning of his administration, Mr. Bush has been implying that America is not part of the larger world, that it is exceptional and therefore above it all.

In actions that included the abrogation of an arms treaty with Russia, not participating in the Kyoto treaty that recognizes climate change and not accepting the jurisdiction of the International Criminal Court, his administration has served notice that America is separate and special. Sadly, Sen. John McCain of Arizona, the Republican presidential nominee, is parroting the same ideology.

In fact, Mr. McCain's current platform states: "The United States participates in various international organizations which can, at times, serve the cause of peace and prosperity, but those organizations must never serve as a substitute for principled American leadership."

But American exceptionalism and principled U.S. leadership are concepts that financial globalization does not recognize. The Bush-McCain myth of exceptionalism cannot shield the United States from the super joint economic veto now demanded by the market forces of globalization - a demand created by the administration's lack of economic confidence in dealing with the American economy.

How ironic that after hearing for most of the Bush presidency that Americans are from Mars and Europeans are from Venus - a phrase coined by neoconservative commentator Robert Kagan, who advises Mr. McCain's presidential campaign - that the administration was compelled by the forces of globalization to follow the lead of a perceived weak Europe to deal with the banking crisis.

After spending three difficult weeks arguing that the only way to prevent a major financial crisis was for the U.S. government to buy underperforming debts from banks and rejecting the argument that the administration should invest directly in the banks, Treasury Secretary Henry M. Paulson Jr. was forced to do an immediate about-face.

Globalization, acting in conjunction with realistic European leadership, forced Mr. Paulson's hand. When the Europeans decided to inject money into their banks by buying bank shares, Mr. Paulson had no choice but to follow their lead. If he had not, capital would have flowed rapidly out of U.S. banks into the soon-to-be-safer government-supported banks of Europe.

The financial crisis has pressured Mr. Bush to move belatedly from dogma to practicality and to confront the reality that America is part of the globalized world. But tragically, as in so many other areas of his administration, realism follows only after the deluge.

Edward Goldberg, a consultant on international trade with Russia and Eastern Europe, teaches international marketing at the Zicklin Graduate School of Business, Baruch College of the City University of New York.

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