Carnegie Endowment for International Peace
The United States is witnessing, at least temporarily, the collapse of effective liquidity for the complex financial instruments that have long been used to conduct transactions. But the real crisis is a Keynesian downward spiral, whereby declining consumption and declining investment reinforce each other.
While the attacks of September 11, 2001 scarred the U.S. deeply, the current financial crisis may prove to have more lasting ramifications. Historians are more likely to see the economic crisis as a true global watershed: as the era of pure neoliberal economics abruptly ends, the U.S. must now decide whether to embrace a new American capitalism and accept greater government involvement.
As the U.S. government steps in to rescue the financial system, Latin American leaders are using the crisis to justify their own leftist policies, claiming the United States' free-market approach has collapsed. But some U.S. scholars see a middle ground; future regulation may help guide markets on the national and even the global stage, without completely departing from the free market system.
Although much of the world is relying on an American economic recovery to fend off a global recession, China has proven that it can support its own growth.
President Bush’s announcement that 8,000 troops will be withdrawn from Iraq by February 2009 reflects the extreme fragility of the current situation, and a recognition that the gains made to date could quickly unravel. Jessica Mathews discusses the reasons for and consequences of the withdrawal timetable.
Climate change is one of the most pressing threats the next president will face. While the current debate focuses on alternatives to oil, the next administration must recognize that the key priority is demand management.
As U.S.-Russia relations continue to sour over the Russia-Georgia conflict, it is unclear how the two nations will be able to rebuild their relationship. Although the conflict led to the current deterioration in relations, problems between the two countries were present before. Despite strong rhetoric from Washington, there is a need for an improved dialogue between the United States and Russia.
With reports that Russian troops remain in Georgia, the West continues its diplomatic push to resolve the conflict. Yet the U.S. and its allies have limited leverage with which to influence Russian policy.
The Russia-Georgia crisis has caused a substantial erosion in Russia-U.S. relations. In order to move forward in such a challenging diplomatic environment, the United States should fully support the French initiative to achieve a cease fire.
President Bush recently announced the launch of a U.S. humanitarian mission to Georgia and criticized Russia for what he deemed as its violation of the ceasefire. This accusation struck deeply with many Russians who viewed the intelligence on which the speech was based as false or outdated.