George Sarant

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US ECONOMY AND THE WORLD

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Vladimir Putin described the United States as a “parasite” on the world economy due to the pre-eminence of the dollar, which presumably provides certain advantages. This comes from someone late to the world economic party, considering that Russia still can’t even qualify for the World Trade Organization and remains an economic backwater. But then Putin is nostalgic for the Soviet Union, the Cold War, and great power status. He thinks by being antagonistic to the US he elevates Russia, but no one wants to play his game on this end. The long-suffering Russian people deserve better than the gangster government they have, and attempting to deflect blame for life’s miseries via ultra-nationalism will not rescue a grossly mismanaged state. Given that he’s not exactly buff he should also keep his shirt on.

It is easy to understand resentment of American dominance, although this comes at the expense of no other country. Indeed in all of history there has never been a more benevolent world power. Since World War II the American military has kept the world at relative peace not only for the US but for everyone else, thus providing stability and prosperity. This has come at huge cost to the American people, and the US has the burden of carrying a load for the world in other areas as well. The American economy is still the engine driving the world economy, and if it sputters so does everyone else. Americans are also subsidizing the rest of the world in terms of innovation across the board, but particularly in health via new cures and drugs. For example, the Nobel Prizes in medicine has been awarded to more Americans than to researchers in all other countries combined. Eight of the 10 top-selling drugs in the world were developed by U.S. companies. With this, however, come all the development costs, which are largely born by the US market. So the US is hardly “leeching” on the world economy but rather is carrying a heavy burden.

But the extent to which American problems are displaced across the world can be overstated. The stock market dropped over 700 points this week not due to anything domestic but rather because of fear of defaults and economic collapse in Europe. So while markets crashed and even gold went down, where did money from around the world flow? To US Treasuries, for safety and security, actually driving down the yield. In this context the S&P downgrade of US debt from AAA makes no sense. True the government has to rein in borrowing and cut back on debt, but that process will work itself out. The momentum is all in the direction of cutting spending and debt reduction over time. The economy may be doing poorly at the moment, in no small measure due to the federal government, but this will be set right. After all change is coming; change you can believe in.

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Written by georgesarant

August 6, 2011 at 6:04 PM

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