For Washington, it is, with apologies to Dickens, "the best of times"
and "the worst of times."
It is a time of growing power at home but of shrinking influence
abroad. They are two sides of the same coin, for they both reflect the
economic and fiscal challenges that stand before our nation’s leaders.
At home, Washington seeks to rebuild the nation’s economy after the
financial instability and deep recession of recent months by expanding
its legislative and regulatory reach. For those who serve in the White
House and Congress, and in executive departments and agencies, it is
decidedly "the best of times."
Abroad, however, the world looks beyond Washington for new sources of
economic guidance and financial aid, lessening Washington’s influence
from London to Tokyo, Buenos Aires to Johannesburg. For those who worry
about America’s role in the world, it is assuredly "the worst of times."
At home, signs of federal expansion abound.
The White House and Congress plan to re-regulate the financial sector
in order to prevent a future collapse in financial markets due to the
recklessness of lenders and investors. They also seek to significantly
increase the federal role in health care in order to expand coverage and
reduce costs, and to enhance the federal role in improving schools and
expanding access to higher education.
Not surprisingly, those with a big stake in Washington’s
assertiveness are increasingly reading the tea leaves and moving closer
to the action. "The office market in Washington, D.C., is poised to
topple New York as the nation’s most expensive," the
Washington Post
reported last month, "reflecting the declining fortunes of
the nation’s financial center and the government expansion under way in
the U.S. capital."
Last month, defense titan Northrop Grumman announced that it was
moving its corporate headquarters from Los Angeles to the Washington
area, and the German electronics and engineering behemoth Siemens said
that it would locate a new president and chief executive for its U.S.
business in Washington.
Those announcements followed the 2008 decisions of defense contractor
SAIC to move its headquarters from San Diego to McLean, VA; of Hilton
Hotels to move its corporate headquarters from Beverly Hills to Tysons
Corner, VA; and of Volkswagen to move its corporate offices from Auburn
Hills, MI, to Herndon, VA.
But, while Washington officialdom expands its reach at home and
private interests respond accordingly, Washington’s influence abroad is
declining due to two inter-related problems – both of which are in
America’s hands to fix.
First, the recent financial crisis raised serious questions across
the globe about the viability of U.S.-led free market capitalism.
Gone is the "Washington Consensus" of recent years – the view in
major political and financial centers that U.S.-led free markets would
naturally fuel rising living standards around the world and that rising
living standards, in turn, would inevitably lead to greater human rights
in repressive nations like China, Russia, and the Gulf States.
Replacing the "Washington Consensus" are growing calls for new models
of economic organization to prevent further episodes of financial
mayhem. Blamed for the economic chaos of 2008 that spread from Brussels
to Beijing, America finds it harder to convince a skeptical world that,
economically speaking, it knows best.
Second, Washington’s exploding budget deficit will leave federal
policymakers increasingly bereft of the military resources to keep the
peace abroad, of the foreign assistance to build new alliances, and of
the economic assistance to fuel development projects in under-developed
regions.
While Washington scrounges for money, nations that are flush with
funds will flex their muscles abroad. They include China, with its huge
saving and surging trade surplus, and the Gulf States, whose oil drives
the global economy.
It’s all rather simple, as Stephen S. Cohen and J. Bradford DeLong
write in their engaging new book about America’s global indebtedness,
The End of
Influence:
"During World War I," they write, "the world’s long-reigning
superpower, Great Britain, faced a disturbing development: Just when the
nation really needed it, Britain no longer had the money. The money had
shifted to the United States, where it accumulated for the next 60
years, and then began to drain away. Soon it will be gone."
Ominously, they continue, "[t]he money is not likely to come back any
time soon. The United States is now the world’s biggest debtor, and
there is no other debtor nation of consequence… Does it matter? Yes."
For nearly a century, the United States shaped a world according to
its own designs. Its participation in two world wars guaranteed victory
for the forces of freedom and democracy, tolerance and human rights. Its
economic might generated the funds for such projects as the Marshall
Plan, which helped Europe rebound from devastation and set the stage for
more than a half-century of Western prosperity.
Now, however, America’s future as the world’s leading power is
uncertain. Washington must, through its financial reforms, reassure a
global audience that the U.S. economic model remains preferable to all
others. And it must address its soaring deficit so that it once again
has the resources that leadership requires.
If Washington fails to act wisely on those two fronts, America’s
power will diminish, replaced by that of nations that don’t share our
values and that would be only too happy to witness our demise.
That won’t be good for the United States. Nor will it be good for
those around the world who depend on America’s leadership.
Copyright © 2010 The North Star Writers Group All rights reserved
