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. rad666

    yes the world will forgive, after Obama gives them more borrowed dollars.

    October 17, 2013 at 9:19 am |
  2. j. von hettlingen

    Should the US ask the world for forgiveness for the self-inflicted embarrassment?

    October 17, 2013 at 10:11 am |
    • thatguy

      Which one? There's so many to choose from lately 😛

      October 17, 2013 at 11:34 am |
  3. Abobakar Ibrahim

    Empires come and go. A singer once said "we live and die, heaven we cry" tearfully. A nation is a collection of individuals created by a loving God.

    October 17, 2013 at 10:24 am |
  4. Andrey

    Democratic politicians will make the necessary decision only after trying out all the popular ones ( will never actually come to it because there always be more popular options)!

    October 17, 2013 at 12:06 pm |
  5. Regv

    Sadly, it's not forgiveness that US requires from the world. Note that, historically, most world nations tend to feast on internal strives of another nation. This malice, that's masquerading as forgiveness, is neither required nor welcome. Exploiting internal strives has been the key strategy in building great empires such as the British. Even today we see China exploiting Pakistanis and other satellite nations, in an attempt to impede India's developing phase. No, US should not gauge itself by watching a deceptive world response, instead it needs to introspect for the best possible decisions.

    October 17, 2013 at 1:05 pm |
  6. streaky1981

    "Europe? Euro"

    Europe isn't the Euro, neither is the EU for that matter. The Euro disaster has been of a particularly German engineering where everybody ignores the reality of the situation. As it goes the issues with the Euro are similar to the issues with the US dollar – piling many completely different economies under the same currency means exchange rates are never at any point right for anybody. Rates good for a financial center like New York actively harm, lets say, Detroit – and vice-versa.

    October 17, 2013 at 2:13 pm |
  7. Scott B

    Considering it's the rest of the world's fault for allowing the US to have so much influence over the global economy, I don't think they are in any place to criticize.

    October 17, 2013 at 2:53 pm |
  8. Babak from LA

    Regardless of the world "forgiving" U.S. ... The American people won't!

    October 17, 2013 at 3:17 pm |
  9. Van Ray

    Personally, I will not forgive the shenanigans of the "wing-nut" right of the Republican Party. Speaker Boehner is weak and cannot coral these self-serving morons within his own party. I don't give a "rats behind" about your political view; all I care about is Congress getting the business of the people done and solving problems. We need to vote these self serving people out of office and until the American people "wake up and smell the coffee" nothing is going to change. For me, I've had enough.

    October 17, 2013 at 5:58 pm |
  10. vasiliki-kefala

    I have become an isolationist. skew the world. We need to fix America first. Let's start with Detroit.

    October 17, 2013 at 6:15 pm |
    • krehator

      I'm not sure if our govt works for us anymore. I think they might believe they work for the world.

      October 21, 2013 at 8:14 am |
  11. Dmitry

    Honey, the world is still working on all that forgiveness with George Bush !

    October 18, 2013 at 9:17 am |
  12. vistar hornbill

    The world may forgive USA, but they sure will never forget. Its a reality check particularly for Asians.

    October 18, 2013 at 8:13 pm |
  13. Dallas

    The world will forgive you as long as you keep sending AID { welfare checks..}

    October 19, 2013 at 9:09 am |
  14. Eddie Fonseca

    Spain and the United States of America have one thing in common they have both weak economy's but the one difference between the people in Spain they would not stand for their government being shutdown for two weeks and having all their services go to hell as well. So how can we as American's stand for a small group of people taking control of the world's biggest economy and letting it be shutdown for two weeks from all that lost revenue and people earing pay checks to keep their homes. also some people could have died if there was a shortage of nurses or doctors to treat them. I think the world will forgive America overtime but we need to have better system in place so this type of thing, does not happen to us again. America is seen to the rest of the world as that bright spot where people can live in peace and free from racial hatred also do business with us as well. Without America seen as stable country to trade with will we our great nation loss it's trust in the world as being the biggest trading partner to trade with, for years to come.

    October 20, 2013 at 9:20 pm |
  15. gskicks

    mountainskisports, indontv,

    May 18, 2018 at 4:10 pm |
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