Paris, January 29, 2009 -- The American participants in this year's World
Economic Forum in Davos have been the first to confront the full international blowback to the U.S.-created world economic crisis. The crisis has devastated
America's reputation for intellectual innovation and practice in global finance, its business leadership, and its domination of applied and academic economics -- all promoted at the Davos Forum for decades. Last Friday a Wall Street Journal front-page
headline said: "European capitalism gets a halo."
U.S. leadership has devastated something even more important: the American
reputation for competence, and with it, the justification for
America's six-decade role as world leader.
The Davos meeting has been one of the main channels by which a
Europe long identified with interventionist and regulated social- and
Christian-democratic business values was reluctantly persuaded to
accept American ideas and business and financial principles and
American comment on the crisis until now has certainly been self-
critical (except in certain Wall Street institutions cut off from
human reality), but for the most part there has been little
willingness to assume responsibility. The overall position has been
that "we all made mistakes," and it's time to move on.
A few financial community Cassandras of the recent (or not so
recent) past have been recalled and congratulated (or given their
jobs back); much has been said about "how [ital] could [unital] we
have missed this or that signal;" but on the whole a curtain has been
drawn, and most would agree with Donald Rumsfeld's incantation that
That alibi (or renunciation of responsibility) may work at home but
not abroad. The head of Morgan Stanley Asia told the opening Davos
discussion that 2009, globally, "may be the first year since world
war II when gross domestic product actually contracts."
The International Monetary Fund has nearly doubled its estimate of
bank failures this year; the International Labor Organization says as
many as 40 million people could lose their jobs. Losses linked to bad
U.S. loans could reach $2.2 trillion this year, according to the
IMF. This is twice the estimate the IMF offered just two months ago.
There is more bad news to come, signaled at Davos. The political,
national, and psychological consequences have yet to be fully
appreciated. This crisis implies something else important: The U.S.
reputation for world leadership has crashed and burned.
At the start of the Bush administration years of vainglorious,
ignorant and failing interventions in world affairs, there was great
initial enthusiasm among Americans, believing the nation once again
in the lead of a crusade to moralize the world by destroying evil and
Even as that policy was failing, critics of the administration were
(and remain) mostly inclined to support the general line of fighting
"terrorism." They believed that under more intelligent Barack Obama
management in Afghanistan and Pakistan it was a defensible policy,
consistent with the country's postwar leadership in the Korean War,
the Cold War, the Indochina intervention and Vietnam war, and now the "clash of civilizations" – each gratifying an American self-
conception as leader of the forces of freedom in what ex-President
Bush, in his farewell speech, described as the great struggle between
global good and global evil.
Distraction was provided for much of the world by the economic boom
Alan Greenspan proudly presented as "beyond history." A new economic order had been created by Americans that already had made the industrial world rich, and was confidently predicted to bestow the same blessing on everyone else. Francis Fukuyama's assessment that history was coming to a happy ending was thought only a little off in its timing.
But not only the economy has crashed. It's now necessary to come
to terms with the fact that the cold war was not won by America, but
lost by Communism's internal corruption. That America's Asian
conflicts were actually all defeats: Communist China, Korea, Laos,
Cambodia, Vietnam, Somalia, Lebanon, Iran, Iraq (an estimated 95
thousand civilians killed in Iraq, 15 thousand coalition soldiers and
police, including 4,229 Americans; and the outcome still in doubt).
The war against terror has been a bloodbath with mainly civilian
victims, two free-standing Asian states wrecked, and probably more to
The immediate disaster, evident at Davos, is that the American
economic model of deregulated market capitalism, dominant today in
the U.S. and the rest of the industrial world, cited as a vehicle of
human progress, proves under examination to have been in significant
part an affair of swindle, personal enrichment, looted third world
nations, international and national crime conspiracies, bank robbery
and Ponzi schemes, criminal real estate practices, environmental and
institutional rip-offs, and official corruption.
Stuff does indeed happen, when greed is good and power better.
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