Waiting For the Bellwether

Without decisive leadership from the United States, the global economy will slide into depression. But early signals from the new U.S. administration are anything but encouraging.

A superpower is always to blame. That’s especially true when the superpower doesn’t bother sending an official representative to a global economic forum, as was the case last week in Davos, Switzerland. But it’s also true that critics of the United States, led by the Prime Ministers of China and Russia, had an easy time of it as they accused Washington of incompetence and criminal neglect.

It’s captivatingly easy to blame the United States for the global economic crisis. At the same time, however, the entire world looks to the United States when it comes to the question of how we get ourselves out of this mess. The mood is desperate because of the current numbers, and it can be safely said that the downward spiral of uncertainty, caution and cutbacks in credit markets will continue.

But it’s also plausible that when America takes decisive action, its policies might snatch the rudder from their hands. A lot depends on how Obama’s new administration attacks this question. It has a unique opportunity to reverse the trend but thus far the signs aren’t especially encouraging.

For one thing, the tendency toward protectionism is rapidly gaining momentum, not only in the financial sector but also in commerce. Nothing is crazier than the “Buy American” clause that’s expected to be included in the economic recovery package because it invites retaliation. For a nation whose only hope for salvation lies in exporting, it’s downright insane. For a nation that, for two generations has made free trade the cornerstone of its foreign policy, such a step comes close to bordering on vandalism. Is this the “change” we’re supposed to believe in?

Unlike people in some circles, especially in America, would have us believe, depression is neither good for people nor is it unavoidable. Fighting it, however, will require a decisive hand and global coordination. The United States must take the reins. This economic system was propagated by America and the mistakes made by their politicians and private institutions have contributed greatly to the crisis – even if mistakes from other quarters added to it.