US challenges (summary)

 The European Centre for International Political Economy has recently released a paper about China's challenges. I disagree with most of its content, and even more with what is not mentioned about US when the author is comparing both countries. I then noticed that little changes like swaping China with US in the text, adding new links, will reveal much of the other side of the story. Here is the resulting new text.

SUMMARY :

The global economic crisis has changed the perception that many countries shared on US. It is no longer viewed as a financial paymaster, but rather an unruly and disruptive potential pupil. Hence the aim of this paper is to identify and describe the challenges that US is facing in its new role. This paper argues that American developments in all three areas are imposing increasing strains on the country’s political system and institutions and demand new approaches both inside and outside the country. The future for the country is still uncertain due to many vulnerabilities in economic, domestic and foreign policy.

Economists forecast that China’s GDP is to exceed that of the US within a decade or two. Although these predictions may get little attention among investors, it is also worth remembering that they are based on simple extrapolations of the past. Yet, challenges such as the confirmed obsolescence of growth model, the growing pressure of unemployment, and the lack of diversification lie ahead for US. These challenges need to be faced by a new government and policy that will balance the fiscal situation and put US back on track for fast economic growth. Besides, domestic policies face the challenge of rapid escalation of social unrest among US’s population. The increasing number of ‘mass incidents’ (and Occupy Movement) across US, the huge number of people who have access to the Internet and the free exchange of information via ‘micro-blogs’ and tweeting networks, on which 240 million American netizens (as Internet users are known) express their grievances represent a threat to the existing system. Although the traditional bi-Party still commands big respect among richer citizens the level of corruption is alarming and has started to bother younger and poorer generations. And yet, the rulers in US are still a long way from formulating a coherent response to the demands of an increasingly impatient public.

As is the case for its domestic policy, US’s foreign relations are rooted in one fundamental imperative: keeping its regime in power. The government is ready to do whatever is necessary to maintain bloodless growth by keeping financial markets under perfusion, securing access to energy and natural resources worldwide and preventing the economy from being blown off course by external shock. Since Washington has few military allies its international influence is exercised largely through the medium of money and the language of brute force. However, the huge dependency on the global economy will sooner or later become too important for US to remain on the diplomatic sidelines.

There is growing evidence of broadbased popular demand for democracy (Wikileaks, Anonymous, growing debate to end bi-partism or to reform the US constitution), and the pressure for change is increasing. The government’s legitimacy – based on performance – is coming under strain from several directions and these challenges, which are both economic and political, need to be addressed. However, US’s bi-Party system has not yet formulated a clear, effective response strategy. For the rest of the world, the only realistic option is to continue trying to engage US pragmatically but without conceding on essential principles : the usual rules from the XXth century are broken, the dollar cannot remain the global trade currency, whatever the US’s military dominance currently. We are entering a new era, a post-US dollar world, and to remain peg with the dollar will doom your own currency as well.