After the September financial meltdown, many abroad, and some at home,
immediately - and with undisguised glee - blamed U.S. problems on
cowboy excess and forecast the end of American global influence.
But while those opportunistic critics had a point that reckless
Americans had taken on far more debt than they should, the growing
global economic downturn may well hurt others far more than the United States.
We got into this mess not because the American political system was
flawed or because its free market system was stagnant. The problem was
that after some six years of uninterrupted growth, human greed drove us
to demand even more than we had earned.
Republicans let fast-talking Wall Street gurus gamble their firms
into oblivion. Democrats allowed politically correct Fannie Mae and
Freddie Mac bureaucrats to siphon off bonuses while guaranteeing loans
to millions who had no business taking out a mortgage.
We, the people, ran up credit cards, borrowed for overpriced houses
and drove gas-guzzling cars fueled by high-priced imported fuel. The
result was a national-debt flu - but not a depression cancer - that
sickened an otherwise healthy host.
Why then would America in recession still be in better shape than others?
(1) Oil prices are crashing. That will soon save us hundreds of
billions in imported-fuel expenses - while denying our overextended
enemies in Russia, as well as in Iran, Venezuela and others in the OPEC cartel, half of their accustomed cash to cause trouble.
Meanwhile, the United States is increasing natural-gas production; is
likely to increase drilling offshore; will all but certainly soon build
more nuclear power, wind and solar plants; and is sitting on the
world's largest coal reserves. A new generation of hybrid, electric and
flex-fuel cars are on the horizon that could even shave off more from
our imported-fuel bills.
(2) We are already way ahead of the rest of the world in dealing
with toxic debt. Western Europe is discovering its banks lent more
against their reserves than did their American counterparts. European
real estate was often more inflated than our own. Bankers in Frankfurt,
London and Paris are looking at trillions of dollars in uncollectible
euro loans throughout Latin America, Asia and Eastern Europe. Most of
our toxic debt was at least owed as mortgages by fellow Americans; far
more of Europe's is owed by those outside the European Union.
Even when the United States is reeling from financial panic, foreign
investment continues to flow into America; the dollar, meanwhile, is
climbing against the euro. China's export-driven and Russia's energy
economies are in crisis. They may have hundreds of billions in dollar
reserves, but as the world energy and consumer economies slow, both
countries lack our institutions, infrastructure and broad flexibility
to easily rebound.
(3) The United States is still growing as the population of Europe
shrinks. The populations of Japan and China both age faster than
America's does. Russia faces the perfect storm of a declining, aging
and increasingly unhealthy population. The result is that America can
much more easily grow itself out of a housing glut.
(4) The war in Iraq
is no longer even a war in a traditional sense. Four times as many
Americans were murdered just in the city of Chicago at peace in July
than all those Americans who were killed in Iraq at war in the same
period. The cost of deploying American troops in Iraq is nearing the
expense to station them elsewhere abroad. As Iraqis continue to take
over additional provinces, the American presence will further shrink.
There are also long-term reasons to believe the United States will
better weather the current storm. We are a transparent society that
blares out problems, affixes blame and then fights publicly over
solutions. Japan's real estate meltdown of the 1990s took years to
correct, given the emphasis on secrecy and shame within Japanese
The 50 states of a federal United States - some of them individually
among the world's top 20 economies - are also far better integrated
than the 27 countries of the European Union. American banks are subject
to uniform national policy and are forced to act in concert. In
contrast, British, French and German lending institutions are often
unwilling to bail out other countries, and compete with each other to
attract scarce capital in times of crisis.
The United States military remains far stronger - and more
battle-hardened - than the rest of the world's armed forces combined.
Rogue nations and terrorists try to take advantage of economic
uncertainty, but America remains the best-defended democracy in the
The current financial crisis has startled America from a hypnotic
trance of self-indulgence and irresponsibility. But as we return to
American fundamentals, we may discover that our political, social and
economic system - despite all the current election-cycle hysteria - is
still by far the most resilient in the world.
How odd that it took a financial catastrophe to remind us of that.