G2 Instead of G20

America and China need one another as never before. Europe will have to take care that it isn’t marginalized. If the Europeans don’t combine forces, they’ll go the same way as Great Britain.

The financial crisis became an economic crisis that’s now turning into a social crisis, the likes of which the wealthier areas of the world haven’t experienced since the days following the end of World War II. Poverty is to some extent cushioned in most European nations by their social safety nets, even if the people are no longer guaranteed much more than basic nutrition and a warm room.

In the United States, however, the implosion of the financial sector has led to social consequences that will be burned into the memories of an entire generation. A friend of mine who works in Washington as a journalist recently investigated a story in Ohio about Americans aged 75 and older who have been forced to return to the workforce because their retirement portfolios have shrunk so dramatically. There’s the 78-year-old former social worker willing to bag groceries at a supermarket for $5 an hour. Or the retiree nearing 80 who advertises his endurance and managerial qualities.

It’s great when old people are able to continue working provided they’re physically fit and want to do so. It’s ghastly and had been almost unthinkable in our society up until now that trained and educated elderly people, some very elderly, have to look for miserably paid jobs just to ensure that they can get their nourishment from someplace other than a charity soup kitchen. More has collapsed here than just a financial world that had grown blind to reality and indulged itself in material and speculative excesses. It is an economic pattern, almost a civilization model that threatens to fail unless governments succeed in containing the crisis in the coming years.

Washington remains the new Rome

Hardest hit is the credibility of the U.S. as a role model. Privately and collectively, Americans have been living on credit financed for the most part by the diligently generated and frugally saved surpluses of an ambitious and emerging China. There, where there is as yet no real social safety net, the savings rate per household is nearing 40 percent. The economic crisis is shining a blinding spotlight on the dependency of the Western powers on those in the Orient – even if the fates of lenders and borrowers are interlocked. The fall of one might mean victory for the other, but it would also mean gigantic monetary losses as well.

Washington is today’s Rome, visible in its architecture as well as in words like “capitol” and the behavior of Europeans and others when they come to pay their respects to the Senate and the Caesar in the White House. Washington is still Rome during the crisis, perhaps Rome of the fourth or fifth century, but the Barbarians aren’t just at the door, they’re already in the city. The Barbarians this time aren’t the Vandals, they’re the emissaries of a country boasting a refined culture thousands of years old. But their customs are foreign nonetheless because they don’t love democracy and unlike Alaric the Goth, they come not to take money away, but rather to bring it.

But the result is comparable: New Rome’s prestige, like that of Old Rome, has suffered a gigantic blow. The foundation of the USA’s power has been weakened; the Iraq War and soon, perhaps, a war in Afghanistan have demolished belief in America’s strategic wisdom for a generation. Belief in the American economic model and business management is likewise gone. Warren Buffett, the genial investor and one of the few who fully recognized the dangers of casino capitalism and even tried, Cassandra-like, to prevent the crash, said this week that the U.S. economy had fallen into the abyss.

If European central governments weren’t so preoccupied with their own miseries, and if we had a leadership structure to organize European ideas instead of national pussyfooting around, they might be able to figure out what to do to prevent the nightmare of a global G2 duopoly consisting of the world’s biggest debtor and its strongest creditor. And all of America’s problems aside, we shouldn’t forget that the demography of the United States works to their advantage and puts America in better shape to productively integrate immigrants into their country.

Fobbed off with DVDs

China’s leaders correctly see the United States as a weakened but still powerful partner. Peking could now be tempted to expand common interests into a new form of cooperation. U.S. Secretary of State Hillary Clinton has already signaled that Washington was prepared to back off the human rights issue, something Peking will perceive as an important development.

Obama will shortly make his first foreign trip as President to Europe. That’s reassuring; from a political point of view, his interest in social service and environmental protection as well as his history as an initiator of human rights initiatives and his training in constitutional law should make him more comfortable here than he would be among representatives of authoritarian regimes, regardless of how refined and cultivated they may be. On the other hand, Obama has a lot of problems and little time to do anything about them, and China has the money America needs.

If Europeans wish to be heard, they have to focus their message and speak with one voice. Otherwise, all of Europe might be going in the same direction as Great Britain, America’s truly special partner: during his visit with Obama, Prime Minister Gordon Brown got a cheap collection of American film classics fobbed off on him that can’t even be watched on European DVD players. If the Americans soon start giving all of us movies that can’t be played back in Europe, it will really be time to start worrying.