The Return of America

In many respects, the process set in motion in November of 2008 in Washington and amplified last month at the G20 summit in London represents an unquestionable success for Europe and for Franco-German relations in particular.  Indeed, under French presidency, the European Union planned out and helped an ambitious agenda for global financial system reforms to succeed.  The EU convinced the United States to put its support behind the agenda, which also takes the needs of developing countries into consideration.  

The success of the April 2nd summit in London, including subjects rarely touched upon (tax havens, hedge funds regulation, bonuses, etc.), and the full participation of the new American administration confirms the validity of the European initiative.  Certainly, the personal sensibilities of Barack Obama and of his Secretary of Treasury Tim Geithner during the AIG bonus scandal, the American authorities’ crusade against Swiss banks, and, in general, the indignation of Main Street in regard to Wall Street’s negligence all had an impact on Washington’s support of this regulatory agenda.  Today, there is no longer a transatlantic disagreement over the need to reexamine regulations on the global financial system.   

At the same time, the perception of the crisis is much different in the United States than it is in Europe, especially in France.  “What are your fellow citizens protesting against?” I was often asked over the course of the past two months that I spent in America.  “Don’t you all have a net of nationalized health insurance that is particularly protective?” Paradoxically, while the effects of the crisis have hit the United States quite hard, public sentiment remains much more positive than in old Europe. 

The “Obama effect” has formed a strong antidote to economic and social depression, and certain privileged sectors, benefitting from the reflationary plan enacted by the new administration, have had trouble managing the budgetary resources that have been allotted to them.  More fundamentally, the reconsideration of the free market economy and the “reestablishment of capitalism” are not on the agenda.  Instead, it is all about re-launching the economic machine as quickly and as strongly as possible, which explains the priority given to the reflationary plan over regulatory reforms, and even over the clean up of bank reports.  It would seem that this strategy is beginning to pay off.

Of course, drastic measures have been taken: numerous financial establishments have been placed under federal control, there have been quasi-nationalizations, and the CEO of General Motors has even been dismissed à la Française.  But major malfunctions in the market and massive state interventions are needed to reestablish a normal functioning of the economy as quickly as possible.  The first hundred days of the Obama administration have been anything but a big party. 
Europeans were therefore correct in launching new regulations without waiting for the upturn, because even at the height of the crisis, the terms of these regulations have sparked a debate in the United States. 

Beyond the instinctive confidence in the freedom of enterprise as an essential remedy to the recession, it is clear that the overreaction resulting from the Enron scandal at the beginning of this decade left its mark: the famous Sarbanes-Oxley legislation seriously affected the appeal of American financial markets and their competitiveness at the hands of new Asian and European markets.  The regulatory reforms to come will therefore aim to correct past excesses and, at best, to prevent future excesses, while trying to avoid harming growth and jobs, as well as America’s international competitiveness.  It will also impact specifically American subjects. 

Per usual and as the IMF predicts, America will emerge from the crisis before Europe and, on the way, will take advantage of the crisis to make up for its lag (or pull ahead) in the domains of the future: education, healthcare, energy, the environment, infrastructure, a digital economy …

Rather than bemoan America’s apparent blindness in regard to the detrimental effects of capitalism, Europeans would be better off wondering about their own incapacity, which is just as great and certainly more serious, to learn some lessons from the crisis from the point of view of European construction.  Is it reasonable that a shock of this extent not have any impact on the means and the procedures of handling the crisis at Union level or on the role and the powers of the Commission?   Or that the European elections to come remain dominated by national politics without any relation to what’s at stake?  Will the crisis in Europe only benefit extremists and populism?  The first verdict, unfortunately predictable, next month …