World will forgive U.S. (if it doesn’t default)
October 16th, 2013
12:05 PM ET

World will forgive U.S. (if it doesn’t default)

By James Pach, Special to CNN

Editor’s note: James Pach is the Tokyo-based editor of The Diplomat, an online magazine focusing on the Asia-Pacific. The views expressed are his own.

“Americans can always be counted on to do the right thing, after they have exhausted all other possibilities.” That Churchillian quote is a useful one to trot out as Washington fumbles in its uniquely Washingtonian way towards what those of us in the rest of the free world (yes...we’re still here) would consider common sense.

It’s also quite patronizing. With his stature and his American mother, Churchill could probably get away with it. For everyone else though, it presupposes that political dysfunction only happens in America. And for all the Schadenfreude-tinged harrumphing in foreign capitals, that’s clearly not true.

Take Japan, with seven prime ministers in seven years, public debt climbing past 230 percent of GDP, and a sizeable chunk of one prefecture uninhabitable for the foreseeable future. Too easy? Then try China, where despite runaway, credit-fueled growth, an estimated 500 mass protests take place each day as the population grapples with rampant corruption, choking pollution, food safety scandals and a diabetes epidemic. Or look at Australia, the Organization for Economic Cooperation and Development’s star performer. After six years of Labor government, Canberra has earned a reputation as the world’s coup capital. America’s post-racial moment may not have made it out of Grant Park, but Australia’s post-misogyny moment never happened at all. Europe? Euro.

Even America’s lurch to the right is not without its parallels. In an excellent article in the New Yorker, Adam Gopnik suggests that the “real analogue to today’s unhinged right wing in America is yesterday’s unhinged right wing in America. This really is your grandfather’s right, if not, to be sure, your grandfather’s Republican Party.”

And in this post-Lehman Age of Disenchantment, conservatism is making a comeback abroad. Both Australia and Japan, for instance, have recently elected their most conservative leaders in recent memory. This is not to suggest we’re in for a 1930s rise of fascism, but it’s not surprising to see a backlash against bailouts and Keynesian stimulus. It’s hard to explain debt on the basis of the crises it avoided.

More from GPS: There's no place for hostage taking

Of course, the American political system has its quirks. The multi-year, billion-dollar campaigns to elect a president who cannot make laws are fun. The hatred directed at healthcare legislation that is simply a halfhearted stab at systems used successfully for decades in a number of America’s closest allies – where healthcare costs are lower and outcomes substantially better – is baffling. And the fact that 20 percent of Republicans think the president is the Antichrist is downright disturbing.

But assuming the deal gets done, default is avoided and the government goes back to work, then foreigners will quickly move on from this latest conniption. Too much to worry about closer to home. Nor will Asia shun the U.S. just because Obama skipped a couple of talkfests. Doubtless he was missed at APEC, but I suspect his peers were mostly envious that he got to skip the silly-shirt photo-op.

The much ballyhooed pivot to Asia, meanwhile, is not so much Washington pushing, as being pulled. Witness East Asia’s rediscovery of the U.S. in 2010, when a rambunctious China dropped the “peaceful rise” narrative. Beijing can go on a charm offensive in Obama’s absence, and it will do deals – money talks, after all – but the reality is that China’s growing power leaves most of the rest of Asia deeply unsettled, and China is still today without any true ally.

So all okay then? Yes, but with a few caveats.

First, if the U.S. were actually to default, then disregard the above. The consequences would be dire and Washington would not soon be forgiven. However, while I accept that the reality-free wing of the Republican Party might be prepared to dance Gollum-like into the fiery chasm, I don’t for a moment think that the president would hesitate to deploy at least one of his options for unilateral action.

Second, however, it’s not just enough to avoid default. All this mucking about with the full faith and credit of the United States government has implications. Use U.S. Treasury bills as the football in a game of brinkmanship and the risk-free rate (which is usually the rate on those bills) will not look so risk-free to investors after all. And if it rises, then so will many other interest rates worldwide, which are essentially the risk-free rate plus a risk premium. At a time when the world is trying to pay down its debt, that would be painful. It also puts more pressure on central banks to keep the spigots open, raising the inflation specter.

Finally, while I’ve argued that other countries shouldn’t be too smug, these shenanigans do have an impact on American power. Sure, the U.S. has its armed forces, but the last decade has shown the limits of what even the world’s most powerful military can do on its own. In the postwar world America has achieved far more – really, nothing short of the construction of the postwar international system – on the strength of its credibility. The term used these days is Joseph Nye’s “soft power,” but I’m really referring here to something more elusive, what both John F. Kennedy and Ronald Reagan called a “city upon a hill,” or a beacon of democracy, governance and capitalism in a troubled world.

In Kennedy’s words, America’s “governments, in every branch, at every level, national, state and local, must be as a city upon a hill – constructed and inhabited by men aware of their great trust and their great responsibilities.” Half a century later, that might seem a little too Arthurian; democracy is messy after all. But it was the aspiration that won America its loyalty overseas. Why snuff out the embers?

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Topics: Asia • Economy • United States

soundoff (73 Responses)
  1. Wastrel

    "The world" ought to forgive the US for anything economic, after all the money, food, technology etc. we have distributed throughout the world over the last century at no cost to other countries.

    October 16, 2013 at 12:18 pm | Reply
    • Alison

      If you honestly believe that the US is the only country to distribute food or aid then you are sadly mistaken. Also the technology has come about from collaboration from many countries. The United States, as with many other countries, would not be what it is if not for the support of it's allies.

      October 16, 2013 at 8:42 pm | Reply
      • Colmery

        Good call Alison, Some Americans have not noticed that people with disposable incomes in the middle bracket by US terms are now overwhelmingly people outside the USA. Sure the US still has a high proportion of the rich and very rich, and, it is still a very large economy. But no longer the biggest and on a decline that risks social fragmentation if not managed intelligently.

        All that is not to say that the USA is not important, but it now needs to learn the lesson all empires eventually face, that is that a dominant phase passes and clinging on to past glory gets in the way of making the next phase as good as it can be.

        The way Europe can help is that several of the nations that came together there after the horror of two world wars, were dominant empires some time in their history. The myths and legends we tell ourselves when we are dominant is like the hubris of dominant males in nature. In the words of Teddy Roosevelt, Speak softly ... but forget the stick, try reason and the example of your compassion.

        October 16, 2013 at 10:49 pm |
      • john smith

        America is the root of all terror. America has invaded sixty countries since world war 2.
        In 1953 America overthrow Iran's democratic government Mohammad Mosaddegh and installed a brutal dictator Shah. America helped Shah of Iran to establish secret police and killed thousands of Iranian people.
        During Iran-Iraq war evil America supported Suddam Hossain and killed millions of Iranian people. In 1989, America, is the only country ever, shot down Iran's civilian air plane, killing 290 people.
        In 2003,America invaded Iraq and killed 1,000,000+ innocent Iraqi people and 4,000,000+ Iraqi people were displaced.
        Now America is a failed state with huge debt. Its debt will be 22 trillion by 2015.

        October 17, 2013 at 3:36 am |
      • LOL

        Lmao. Most of the world has no idea how much it has benefitted from the US –specifically. The internet, telephone, cellphone, computer. Just to name a few. YAWN at the underachievers who try to tear us down. Seriously, not even in our league.

        October 17, 2013 at 4:43 am |
      • Cadiz

        I did not see where Wastrel implied that others have not also given money and technology to the rest of the world. It has always had a habit of doing so, however, and has consistently worked to help rebuild nations that were formerly its enemies while others have often instead forced the payment of reparations. Yes, some of the technology was in collaboration with other nations, but Wastrel is right that much of it has originated from American inventors as well as inventors from other nations who have been welcomed to America where they can bring their dreams to fruition.

        October 17, 2013 at 8:59 am |
      • Wayno

        LOL, LMAO, yawn, not even in our league .....yep yet another yank full of stupid acronyms (look it up its in the oxford dictionary) and as usual with their head up their own a$$!

        October 17, 2013 at 9:56 am |
    • lucke

      not to mention fleecing most of them for God's reasons... no interest at all.

      October 16, 2013 at 9:26 pm | Reply
    • john isner

      the U.S has done alot of good but you seem to forget everything bad and all the wars that killed millions of people

      October 16, 2013 at 9:46 pm | Reply
    • Ro bbert

      It is very sad to see the comments that the rest of the world should be grateful to the US. Not only has the US belittled and pushed the world into taking bitter medicine ( Asian Crisis) and let the economic forces weed out the "bad banks and companies" only to turn on the tap and bail out their own companies and print money and distribute this money without rhyme or reason, the rest of the world is keeping its head above water. Times have changed and it appears very difficult to swallow. The US should only talk and preach after they have their own house in order, which is now left to the next generation to burden. Take the bitter medicine and show the world that you are still an economic power ( politically that may be difficult.....)

      October 16, 2013 at 11:04 pm | Reply
    • Danny

      in 1999 the national debt was £3.6 trillion, this has grown to £17 trillion in this short period and caused economic strife in Europe from your dodgy sub prime. US has caused wars in order to get you mugs to pay your gun makers £13trillion! and now the US people are in a debt they can not clear! all this flag waving has played in to the super rich hands as they know the US general public will happily send their kids to die to fill the pockets of those who dont send their kids! education in teh US has been deliberatly dumbed down and the highest academic positions are held by foriegners in the US and thats all fact! shame you cant see it on your predominantly biased media! all it takes to remove US civil liberties is another false flag incident!

      October 17, 2013 at 4:49 am | Reply
      • Cadiz

        You are a typical whiner who only refuses to take responsibility for your own failures and that of your country. Nobody forced anyone to buy bundled 'sub-prime' loans, your banks did that out of greed hoping they could make it rich on the American market. They failed. The only good thing is there are plenty of British citizens who do not feel the same way that you do.

        October 17, 2013 at 9:05 am |
    • rs1201

      I think the problem in America is that we were not ready for an African American President and we're still not ready. We've made great progress in race relations but we're still not there. The fact that the DNC was able to get Obama elected by electrifying the minority votes in our country and the ultra liberals doesn't make the rest of America ready to accept Obama. Minorities in America have no say in govt or on Wall Street or anywhere else. They still need affirmative action to get into college or even get a job. NYC is probably one of the most liberal cities in the country and yet a walk through Harlem and Spanish Harlem will show you the Grand Canyon that exists between whites and blacks in the city.
      Just like America is not ready for a Jewish President...we're just not ready for a Black President...we're not there yet!!!!

      October 17, 2013 at 9:09 am | Reply
  2. Jakerman

    Does the world reall care about us? Should we waste our time worrying about nations that would really care less if we fell off the face of the planet? No matter what choices we make some will be for us and some will be agianst us. You can't please everyone so you've got to please yourself.

    October 16, 2013 at 12:19 pm | Reply
    • AyresRocket

      Well,your good buddies in Australia care.
      We stand with you guys pretty much unconditionally because your country's ideals and principals are what we also believe in.
      Go USA/Aust.

      October 16, 2013 at 9:16 pm | Reply
      • Stevo

        No, you are just afraid of China, and so is the US.

        October 17, 2013 at 1:57 am |
      • Wayno

        Speak for yourself rocket! I think it's time the world moved on from this redundant society. People who insist on having a gun under their pillow, who are letting religion influence their education system particularly in history and science, and a political system that is clearly off the rails and a superiority complex beyond belief are no longer deserves to be the worlds leading light! The US dollar as a reserve currency is something the economic world needs to move away from as it is becoming a negative factor as the rest of us try to move to stability!

        October 17, 2013 at 2:34 am |
      • Danny

        IN europe we would like to remove all US influence and stop dragging us in to war for OIl for US super rich! while the US citizens still living in tents in New Orleans and Blacks dont get votes in florida!

        October 17, 2013 at 4:52 am |
      • Danny

        well of course you do, you have the same history of murdering and stealing the land of the land off the indigenous people! and tehn also have the gaul to stop further migration! pathetic!

        October 17, 2013 at 6:11 am |
      • Cadiz

        Ayers, you are right and the US has other good friends who care as well. There are many of us in the Philippines who care a lot. The problem is the media tries to play that down for their own reasons. Go Australia! I stand with you,

        October 17, 2013 at 9:07 am |
      • Cadiz

        And then there are people like Danny who prefer to spit on those who have given them a hand because they hate that they had to ask. I guess he still holds a grudge that his grandmother so effusively welcomed American soldiers in WW2 after they had come to help them. Danny, you may be part American, get over it.

        October 17, 2013 at 9:12 am |
      • rs1201

        Thank you so much for being our ally. My son is presently spending time both in Australia and New Zealand to get specialized surgical training and he loves you guys...your hospitality...your good humor....and making him feel safe and at home. Thank you so very much for being you!!!!!

        October 17, 2013 at 9:13 am |
  3. copperhead

    The world will stand around waiting from the money our government sends them.

    October 16, 2013 at 12:30 pm | Reply
    • rage@thedying of the right

      What money? Mental.

      October 16, 2013 at 4:26 pm | Reply
      • too bitter to try

        We send Russia billions of dollars of aid every year, mostly as under-the table payments to keep their old missiles inside Russia.

        October 16, 2013 at 7:26 pm |
      • Andrey

        @ too bitter to cry: Why would not you check your facts before posting this crap? The only "help" that US sends to Russia is the money that CIA pays to traitors posing as Russian liberal opposition for instigating protests and distributing anti-Russian propaganda. That's why Putin kicked your USAID contraption out of the country!
        The only country you help is Israel: only because your Jewish masters want to support their people using your tax money rather than spending their own. And who would blame them for taking advantage you brainwashed halfwits: not me!

        October 17, 2013 at 12:21 pm |
  4. Rick McDaniel

    The world should NOT forgive.

    The world should recognize that if the U.S. cannot stand up to the dictator, to get control of their fiscal house........then the world must IMPOSE on America, the necessary corrections, by DENYING the U.S. any more debt!

    October 16, 2013 at 12:40 pm | Reply
  5. JT

    The world doesn't have much of a choice.

    October 16, 2013 at 12:48 pm | Reply
  6. Jeff

    The world is going to STOP ACCEPTING US Dollars is what they are and are ALREADY doing!

    October 16, 2013 at 12:54 pm | Reply
    • Danny

      Other countries are trying to stop using dollars but the US keeps making up lies and bombing them and trying to put muppet regimes in, we are on to your nazi take-over style plans of world domination! And the world is opening their eyes! £13 trillion debt incurred by teh government in 13 years and the US Citizens and their great great grandchildren will carry this debt to their grave, every US citizen has now got a ball and chain on their ankles!

      October 17, 2013 at 5:20 am | Reply
  7. cacique

    Even the USA already started to function without a central government, a few more of these charades and the politicians will kick our country into obsolescence without other countries lifting a finger. Those elected government officials have to take a hard look at themselves and their actions because from out here they look like a bunch of self-serving morons, partisans full of useless pride maybe even unaware of the damage they are doing to the country.
    They all should be put before a grand jury to be tried for negligence and stupidity in the discharge of their duties.

    October 16, 2013 at 1:18 pm | Reply
  8. Jon

    Every country forgives every other county for everything with enough time (say 4 generations). We as individuals get upset about something for only so long until the next outrage gets us upset about something else, swinging from vine to vine, always outraged about something or other. Some ethnic groups, on the other hand, need to maintain a perpetual flame of outrage to help define their ethnicity by the outrages they have collectively experienced.

    October 16, 2013 at 1:30 pm | Reply
  9. Darlene Buckingham

    Other Countries aee not as quick to bomb people into democracy. The USA and the people who have been perpetrating the illegal and immoral wars will never be forgiven until they acknowledge the harm they have done.

    October 16, 2013 at 1:41 pm | Reply
    • Danny

      Very True

      October 17, 2013 at 5:22 am | Reply
  10. George

    The Tea Party will never back down. The U.S. will default. This is what they want. What we are witnessing is the emergence of a previously quiet group of lower class citizens who many times in past elections just didn't vote at all because they were comfortable. Now they want this big intrusive government to fail and fail big time.

    October 16, 2013 at 2:00 pm | Reply
  11. Ld Elon

    copperhead

    The world will stand around waiting from the money our government sends them.
    October 16, 2013 at 12:30 pm

    Due to debts, and/or other reasons, they'd rather have not aired.?>

    October 16, 2013 at 2:01 pm | Reply
  12. Sivick

    this story makes me even more ashamed of congress. Didn't know that was possible.

    October 16, 2013 at 2:11 pm | Reply
    • TiredOfPaying

      The article states 20% of Republicans believe Obama is the Antichrist, but Congress has a 14% approval rating according to the FoxNews site. So that means that Satan is 6% more popular than Congress?

      October 16, 2013 at 4:01 pm | Reply
  13. execuseme

    speak for yourself. I am not that forgiving. Will dump all US issued bond portfolio to save my hard earned money. In the end, it doesn't matter if US default. The fact this is now a serious possibility is enough to make all investors give US bond or even dollar a second thought

    October 16, 2013 at 2:22 pm | Reply
  14. RT Colorado

    Since the days of the Founding Fathers Americans have fretted over what the Europeans thought of them, that was then, but today is a different matter altogether. The complexities of the US currency and it's use as a "safe haven currency" or as the reserve currency for trading commodities are too great to squeeze down to fit this forum, but suffice it to say...the world doesn't have a reasonably safe alternative to the US. Forgive us or not, the rest of the world is going to have to suck it up and drive on until they can settle of whether or not they trust the Chinese or the Russians more than they trust us (not a great set of options, but there it is). Everyone can wring their hands, gnash their teeth and wail in dark alleys until the cows come home, it doesn't change the realities of life. As some one once said "Wish in one hand and s**t in the other and watch which one fills up faster". All of the hullabaloo over this recent "dust-up" over the debt limit and the government shutdown just demonstrates how little American history is studied or understood in this country. Americans as a whole are essentially ignorant of how the government works or how it became the government system it is now. Most Americans readily admit (unashamedly) that they couldn't be bothered about learning anything about the American style of government beyond being able to shout some insanely idiotic slogan at a rally and demand their rights. When in fact if Americans were awarded the privileges of citizenship based on their knowledge of government they would receive nothing. Just proves the adage about "All Talk and No Action". America is suffering a great degeneration, slipping from it's greatness into the column of the "Also Rans", but it seems that is what American want and that being the case, what they will surely receive.

    October 16, 2013 at 3:11 pm | Reply
  15. Lateris

    Damned if we help the countries of the world and damned if we don't. After all the hate from the rest of the world I would rather see America become an isolationist country. Lets see how the other two super powers can manage the world from a humanitarian perspective. As a result maybe the rest of the world can deal with it's own problems as adults, and we can deal with our sick, homeless, vets, and other social and medical issues that desperately need the billions of dollars invested that we send to the rest of the world invested back into America. Instead, we find our Federal Government aiding political organisations who hates us, militant organisations that want to destroy us. Its hypocritical how I live in the wealthiest country in the world but I see vets from the Iraqi war begging for food and money on my street corner.

    October 16, 2013 at 5:12 pm | Reply
  16. tokalosh0

    This government has far more blood on it's hands over it's war crimes of the past 20 years than a simple financial default. When they do default, they will join a very long list of other countries to have done so. Eventually, someday, there will be a recovery. What goes down, must at last go up. Life will go on. Other issues, not so much.

    October 16, 2013 at 5:17 pm | Reply
  17. Terry

    Forgiving while sticking their big fat hands out. They make me sick.

    October 16, 2013 at 6:22 pm | Reply
  18. largo

    When we survive our government shutdown we will surely resume telling other countries how to conduct their internal affairs, how they should construct their governments using ours as an example. They may wonder why they should bother listening to our president and/or our intelligent know-it-all elected professional politicians.

    October 16, 2013 at 7:37 pm | Reply
  19. Joe

    I think 'the world' is over the brinkmanship and will do everything they can to both distance themselves and loosen ties with the US. The US is a failed state when this kind of B/S goes on

    October 16, 2013 at 8:57 pm | Reply
  20. richwood7

    Their is a difference between forgiving and forgettiing. The worldd should NEVER forgot that just a few terrorists can hold the USA hostage. With the Tory Party in Congress, their allegence to Norquist and their hatred of the freedoms we have fought for, their total disregard of USA honor, they world MUST turn away from global dominance by America.

    October 16, 2013 at 9:47 pm | Reply
  21. uqmaffle

    Forgive, hell! The US Congress has shown itself to be the biggest bunch of incompetent morons on the face of the planet, holding the country and the world to ransom for their own selfish political motives, and we're supposed to forgive them for this intolerable stupidity? By the same token, we should forgive Al-Quaeda for ramming a couple of planes into the World Trade Centre, an act that caused far less damage to the world than a US default would have.

    October 16, 2013 at 10:17 pm | Reply
  22. Deutsche Bier

    CNN, who is "world"? I am part of the "world", and I don't give a fart. I neither forgive nor not forgive.

    October 17, 2013 at 2:16 am | Reply
  23. Wizard of Australia

    So all Australians are a bunch of misogynists? Is that the best you've got to make the Australian government look problematic? You're laughing now, but wait till the other countries stop trading in USD. The American economy will tank and the U.S will become the U.S.S.R

    October 17, 2013 at 5:42 am | Reply
  24. MxO

    It is just so sad that US still thinks of itself as the most powerful country in the world. So very sad.

    As for forgiving US for the almost-default crisis, you can bet we will be watching very closely and making plans to move away from the US-centric global economy.

    There will not be a next time.

    October 17, 2013 at 6:14 am | Reply
  25. tomczerniawski

    No forgiveness. You spied on us all with your NSA. We haven't forgotten.

    October 17, 2013 at 8:26 am | Reply
  26. lolwow

    This is idiotic article if American dollar loses the role as global currency which china and the rest is pushing after obama increased the debt and tryed the gridlock will be no more qe and anything else. Anyone that doesn't get basic economic should go die in corner. Not even bond rates or treasures are more important than losing dollar as global currency for exchanges. Are people so idiotic do these people read at all what is going on? This article is positive brush to wipe the crap on washington

    October 17, 2013 at 8:31 am | Reply
  27. lolwow

    There are positive articles here in cnbc clowns and even bloomberg lol only financial times and few others are describing relaity what to expect from cnn clowns of politics like cnbc are clowns of financial news

    October 17, 2013 at 8:33 am | Reply
  28. lolwow

    Faird will you ever cover what china has mentioned about obama debt increase and the gridlock and that obama didnt go into asia summit ? stop being such a asskiser and give for once real news. CHijna is getting tired of all these idiots

    October 17, 2013 at 8:35 am | Reply
  29. Jamie Goggin

    It's too bad that Churchill never actually said that. Some basic fact checking with google would have made the rest of this story much easier to swallow.

    October 17, 2013 at 9:01 am | Reply
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