Op-Ed
Columnist
Americathe Tarnished
By PAUL KRUGMAN
Published: March 29,
2009http://www.nytimes.com/2009/03/30/opinion/30krugman.html?_r=1
Ten years ago the cover of Time magazine
featured Robert Rubin, then Treasury secretary, Alan Greenspan, then chairman
of the Federal Reserve, and Lawrence Summers, then deputy Treasury secretary.
Time dubbed the three “the committee to save the world,” crediting them with
leading the global financial system through a crisis that seemed terrifying at
the time, although it was a small blip compared with what we’re going through
now.
All the men on that cover were Americans,
but nobody considered that odd. After all, in 1999 the United Stateswas the
unquestioned leader of the global
crisis response. That leadership role was only partly based on American wealth;
it also, to an important degree, reflected America’s stature as a role model.
The United States, everyone thought, was the country that
knew how to do finance right.
How times have changed.
Never mind the fact that two members of the
committee have since succumbed to the magazine cover curse, the plunge in
reputation that so often follows lionization in the media. (Mr. Summers, now
the head of the National Economic Council, is still going strong.) Far more
important is the extent to which our claims of financial soundness — claims
often invoked as we lectured other countries on the need to change their ways —
have proved hollow.
Indeed, these days Americais looking like the Bernie Madoff of
economies: for many years it was held in respect, even awe, but it turns out to
have been a fraud all along.
It’s painful now to read a lecture that Mr.
Summers gave in early 2000, as the economic crisis of the 1990s was winding
down. Discussing the causes of that crisis, Mr. Summers pointed to things that
the crisis countries lacked — and that, by implication, the United Stateshad.
These things included
“well-capitalized and supervised banks” and reliable, transparent corporate
accounting. Oh well.
One of the analysts Mr. Summers cited in that
lecture, by the way, was the economist Simon Johnson. In an article in the
current issue of The Atlantic, Mr. Johnson, who served as the chief economist
at the I.M.F. and is now a professor at M.I.T., declares that America’s current
difficulties are “shockingly reminiscent” of crises in places like Russia and
Argentina — including the key role played by crony capitalists.
In Americaas in the third world, he writes, “elite
business interests — financiers, in the case of the U.S.— played a central role
in creating the
crisis, making ever-larger gambles, with the implicit backing of the
government, until the inevitable collapse. More alarming, they are now using
their influence to prevent precisely the sorts of reforms that are needed, and
fast, to pull the economy out of its nosedive.”
It’s no wonder, then, that an article in
yesterday’s Times about the response President Obama will receive in Europewas
titled “English-Speaking Capitalism on
Trial.”
Now, in fairness we have to say that the United Stateswas far from being the
only nation in which
banks ran wild. Many European leaders are still in denial about the continent’s
economic and financial troubles, which arguably run as deep as our own —
although their nations’ much stronger social safety nets mean that we’re likely
to experience far more human suffering. Still, it’s a fact that the crisis has
cost Americamuch of its credibility, and with it much
of its ability to lead.
And that’s a very bad thing.
Like many other economists, I’ve been
revisiting the Great Depression, looking for lessons that might help us avoid a
repeat performance. And one thing that stands out from the history of the early
1930s is the extent to which the world’s response to crisis was crippled by the
inability of the world’s major economies to cooperate.
The details of our current crisis are very
different, but the need for cooperation is no less. President Obama got it
exactly right last week when he declared: “All of us are going to have to take
steps in order to lift the economy. We don’t want a situation in which some
countries are making extraordinary efforts and other countries aren’t.”
Yet that is exactly the situation we’re in.
I don’t believe that even America’s economic efforts are adequate, but
they’re far more than most other wealthy countries have been willing to
undertake. And by rights this week’s G-20 summit ought to be an occasion for
Mr. Obama to chide and chivy European leaders, in particular, into pulling
their weight.
But these days foreign leaders are in no
mood to be lectured by American officials, even when — as in this case — the
Americans are right.
The financial crisis has had many costs. And
one of those costs is the damage to America’s reputation, an asset we’ve lost
just when
we, and the world, need it most.
[Non-text portions of this message have been removed]
