United states Today Economic Situation and its Credibility around the world - Essay Example

?The United s’ Current Image in the International Community At that time when the United s’ congress was still debating on the policy that should be applied on the debt issue, there were probably millions of Americans who were keeping themselves updated about the developments. I for one got interested on it because not just because I have been avid observer of how the two mainstream political parties deal with each other on contentious issues; I also knew that subjects related to the financial conditions of the government have serious repercussions on the health of the national economy. However, while reading the comments section of every online news report, I realized that it was not just Americans who were keeping themselves informed of the latest developments on the matter but also foreigners as well. Aside from this, I also read several news reports in which officials from other countries also expressed views on the subject. As I encountered more of such articles, I began to realize that the highs and lows of the American economy do have profound impacts on other countries. Because of this, it is only expected that they have their own views of current economic conditions of the US. It is also apparent that while the US boasts of still being the most powerful nation on Earth, the cracks on its walls have shown and grown worse through the years as its economy continues to remain in deep crisis. This can be observed by the international community who could only express negative opinions on the matter. For more than a century, the US has long held the title as a dominant global superpower. The two most compelling factors regarding this matter are its economic superiority and military strength. In the 1900s, US dominance was ostensibly challenged by the Soviet Union. It was after World War II that the contest between the two superpowers became more intense. However, the Soviet economy was not match to that of the US. Apparently, while the Soviets continued to espouse a closed-door socialist economy, America was extending it market on a global scale. I find this action not as a reflection of the benevolence or generosity of the country’s big business but simply a result of the drive to accumulate more profits from less saturated markets abroad. To some extent, the economic superiority of the US then had managed to scale down the impression that it too was trying to dominate the world with its military strength just as the Soviets did. From my point of view, this prompted the development of the concept that economic relations with America make other nations richer too even as it is also making infractions on the sovereignty of other countries through military intervention. When a superpower lavishes a poor country with imported products, it could hardly be considered as a bully by the people. This was definitely not the case with the Soviet Union, which only focused on asserting military superiority. The current economic crisis that the US is facing has proven to be disastrous not just to the average American citizens but also to many other countries in the world. This is naturally the result of several decades of dominance also of the country in the sphere of international trade and global economy, in general. Through all those years, especially after the World War II until recently, the US is a major trading partner of a good number of economically more backward countries. These had established relations with the US as their largest market of raw materials and, at the same time, supplier of capital goods and other high-value added finished products. With the crisis besetting the US economy though, it has become a less attractive market from the perspective of those countries that export their raw materials to it. Apparently, the crisis has also led to slower production of capital goods and finished products in the US, while countries like China and India are showing successes in coming up with commodities that are competing with those it had been manufacturing. If I were to be the an economic adviser for a developing country that thrives mainly on exporting agricultural and semi-processed materials, I would naturally prefer to trade with one that still has a growing market for the commodities that I am exporting as well as one that can provide me with cheap alternatives to those imports that I have been getting from the US. The economic crisis that the US is facing, therefore, would definitely prompt me to replace this country with another as my major trading partner. I would seek more possibilities in Europe and open my doors further to the likes of China and India. The crisis spurred by the debate in the US congress regarding the debt ceiling only showcased how the continuing political squabbles in the country could badly hurt the economy. The world watched as the debate was finally resolved with the US only displaying once again what many other economists based in other countries consider as a sign that Washington was only more concerned with settling political contradictions instead of taking into consideration the most appropriate economic solutions that could solve its economic problems. Deng Yushan of China’s Xinhua writes that “given the United States’ status as the world’s largest economy and the issuer of the dominant international reserve currency, such political brinkmanship in Washington is dangerously irresponsible, for it risks, among other consequences, strangling the still fragile economic recovery of not only the United States but also the world as a whole.” (28 July 2011) The settlement reached between the Democrats and the Republicans might have shown that despite their great differences in terms of political principles, they could still unite for what they think is best for the country. However, as they do so, many other major players in the world economy could only express criticism over the deal on the debt ceiling. The editorials in the major dailies in Canada, Australia, and other economic powers in Europe have all pointed out the same observation as that of Xinhua. Of course, these reactions are based on the respective perspectives of countries that are only indirectly affected by US actions. Nevertheless, it is quite clear that the credibility of the US has plummeted because of it the deal reached regarding the debt ceiling. The debt ceiling issue was absolutely contentious because of the repercussions it may have on the American economy. However, it was obvious that the both the Republicans and the Democrats, aside from seeing the issue from political point of view, were not concerned at all with the adverse effects it may have on its reputation as an economic power. Both parties ultimately agreed to increase the debt ceiling while at the same time reduce government spending. Any country that has strong economic ties with the US, including providing fresh loans and the materials used by its government would certainly see this as desperate move that would only increase further its dependency on debt. The problem here is that the US is still considered as the world’s largest economy. Many of the advanced countries are trading with it. The less developed ones are exporting their raw materials and semi-manufactures to it. If the US collapses due to the debt burden, the rest of the world would surely be confronted with acute economic crisis too. Therefore, it is only right for some foreign economists to consider the decision reached by the US Congress on the debt ceiling as selfish and insensitive to the welfare of other countries. The credibility of the US would naturally be tainted by such policy on the debt ceiling. I believe that the US may think that it should not care less for other countries at a time when it is already suffering from the effects of erroneous fiscal and economic policies before. However, it is not just loss of credibility that would hurt the US but also the lack of trust from international creditors. I think that this is what would bring damage to the country the most. When a country continues to uphold a policy of increased borrowing while not making any concrete steps to strengthen its fiscal situation, an international creditor would be expected to peg higher interest rates. Aside from this, it would also find it difficult to acquire fresh loans. In other words, its credit rating would fall. Ultimately, this would be bad for the economy of the US. It is very probable that it could face debt default in the future. A debt default is tantamount to bankruptcy. Because of this, there would actually be two possible actions that can be taken against the US; one is that it would no longer be provided with loans by foreign creditors and, two, is that it foreign investments would no longer enter the local market and those that are already in would be pulled out. This is unfortunate indeed, especially because the US had always been known as a promoter of globalization and free trade. Now, however, it seems to have taken the path of protectionism, driving away investors through what may be considered as policies that are not faithful to the principles of free trade. Apparently, the loss of credibility would not just mean a loss of face of what would once be known as the world’s most powerful economy. It would also mean in deeper domestic political and economic crisis. In my opinion, it would be very likely that Washington could again put into play the usual card when it is confronted with such situations: use the military to assert global dominance. There is no doubt that the US has the most powerful armed forces in the world. While it may no longer be as powerful as it once was in the world economy, there is no doubt that it is still the undisputed military superpower. If it loses credibility and if it is no longer trusted by other nations in terms of fiscal policies, it could always employ the military to impose its will. This would only erode further the remaining respect that other countries and peoples have for the US. The only other option that the US has is to play fair in the global economy and to deal with its fiscal crisis in ways that to do not put others at disadvantage. While this may be the more difficult path, I believe the US should follow it or else it runs the risk of being labeled as a superpower that relies only on its military to deal with other countries. Work Cited Deng, Yushan. “Bring Some Sense of Global Responsibility to Brinkmanship-Obsessed Washington.” Xinhua, 28 July 2011. Retrieved August 20, 2011 from . Read More