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Not quite, but both flavors — unfettered American-style and European social democracy — are in trouble.
NEW YORK — When the European Union finally admitted on Thursday that it would have to join Niger, Cambodia, Haiti, Iceland and countless other troubled economies in line for International Monetary Fund (IMF) emergency funding, the already serious leak in the dam of Western economic credibility turned into a roaring torrent.
The first blow came in October 2008, of course, when the recklessness of a deregulated financial services industry in the U.S. and Britain nearly threw the globe into a depression. Now, the smug Eurocrats have joined the arrogant pinstriped set in the Emperors Without Clothes Club.
The rest of the world has noticed. Zhu Min, deputy governor of the People’s Bank of China, told a conference in Hong Kong last week he viewed Greece as the tip of a huge fiscally dysfunctional iceberg, one likely to swallow up European hopes for growth for years to come. Sounding vaguely Reaganite, he criticized the way governments in the West seem unable to live within their means, and noted that the United States and Britain were little better than Greece, Portugal or other weaker EU economies.
“The U.K. is weak. America itself is weak, because in a two- to four-year horizon, U.S. debt will climb to 110 percent [of GDP] and stay there for a while,” he said. “The governments tried to put every burden from the financial sector onto their own children. Now they find nobody can save them.”
Newt Gingrich couldn’t have put it more clearly.
With Western geopolitical credibility already severely weakened by the Iraq fiasco, this latest blow can only accelerate the rising influence of China on the world’s many aspiring powers.
Imagine this: You’re the finance minister of a medium emerging-market economy, and the drop off in exports caused by the global recession has led you to turn to the International Monetary Fund for a loan. But the IMF — its funds tacitly controlled by the U.S., the EU and Japan — is refusing to extend the relatively small $20 billion line of credit your country needs to avoid being downgraded by the world’s credit agencies. Your budget, normally in surplus, suddenly is showing a deficit of almost 12 percent of your economy’s annual output.
So the IMF insists on draconian cuts to public services, including education, health care and public sector salaries — the latter of which keeps 65 percent of your population, including the all-important army, barely above subsistence. What’s more, the West used its United Nations Security Council votes to condemn a crackdown on dissent by your president-for-life just last month, making the prospect of bending to the “imperialists” even less savory.
Enter China. “Who are these Westerners to dictate terms to you?” the man from the China Investment Corporation, Beijing’s primary sovereign wealth fund, whispers in your ear. “We will give you the $20 billion you seek, with no interference in your internal affairs. We just want you to let our oil company build a liquefied natural gas terminal on your coast, and a promise that you will export 80 percent of all your precious metals and petroleum products to us.”