China's economy will remain strong despite the current global financial crisis, but its leaders should not assume that the crisis is a failure of capitalism, concluded Albert Keidel in a speech before the U.S.-China Business Council last week. Both the United States and China can learn from the crisis to improve their political and economic systems.
As world leaders prepare for next month’s international financial summit, critics remain skeptical about how quickly the IMF and the World Bank can actually adapt to the 21st century. Yet the mere fact that the upcoming summit will include leaders from the G20—rather than just the G7, as tradition would have it—suggests that the world is moving toward an unprecedented new financial order.
Today's financial crisis in America looks remarkably like the crisis that struck Japan 20 years ago, when a stock market meltdown exposed years of speculative lending, mostly dependent on real estate, and led to an economic collapse. The United States can take lessons from the Japanese experience as it attempts to engineer its own recovery.
In this phase of the financial crisis, struggling countries are looking to rising powers for help, rather than turning to the conditional aid traditionally offered by the IMF. This trend highlights the shifting global financial order and indicates that emerging powers will undoubtedly play a larger role as the international community attempts to define a new global financial system.
A key factor in Sunday’s national Russian elections was that parties lacking State Duma representation were denied registration. This is part of the current Kremlin strategy to purge the political field. But the grim economic situation makes this effort, and the election of deputies doing little more than passing along instructions from the top, morally obsolete.
Although no one can yet predict the full implications of the financial crisis, it may have a silver lining for the U.S. if it is able to maintain its position of power while learning valuable lessons in humility. In the future, the U.S. may be more cautious about taking on massive debt, less reckless with its military spending, and more willing to cooperate on global problems.
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.
As the economic crisis unfolds, the drama of impending calamity has spurred politicians to take action without fully understanding the crisis. Nobody knows if the bailout will work, and moreover, it fails to address any of the underlying economic problems that we face. Moving forward, our leaders must exercise much more thought and caution in addressing this wide array of economic challenges.
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.
While the attacks of September 11, 2001 scarred the U.S. deeply, the current financial crisis may prove to have more lasting ramifications than 9/11. 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.