The Post-American World - Fareed Zakaria [23]
Before 2008, whatever people thought of American foreign policy, they all agreed that the United States had the most modern, sophisticated, and productive economy in the world—with the most advanced capital markets. As a result, it held hegemony not just in military power and diplomacy but in the realm of ideas. Central bankers and treasury ministers around the world studied the basics of their profession at American schools. Politicians developed their economies by following the advice prescribed by the Washington consensus. The innovations of Silicon Valley were the envy of the world. New York’s deep, lucrative capital markets were admired and imitated on every continent except Antarctica.
As Brad Setser, a fellow at the Council on Foreign Relations, has noted, globalization after World War II was almost synonymous with Americanization. “Foreign borrowers looking to raise funds tended to issue bonds denominated in dollars, made use of New York law, and met the Securities and Exchange Commission’s standards for disclosure,” he writes. American ideas and institutions were made all the more attractive by the country’s economic success.
The collapse of Wall Street significantly eroded the legacy of that success. The American economy has emerged from the recession, but it will potentially grow slowly for years to come, burdened by debt. Most of Europe is in the same boat, and some countries, like Greece and Ireland, are far worse off. Naturally, economic activity everywhere has been affected by this collapse of the first world. But the economies in the big emerging markets—China, India, and Brazil—are now large enough that they have significant economic activity of their own (domestic demand) that does not rely on exports to the West. As a result, the International Monetary Fund says that 100 percent of global growth in 2009 came from emerging markets. While the financial markets of these countries are coupled with that of the United States, their actual economies are, for the first time in history, beginning to gain some independence from it. Goldman Sachs originally projected that the combined GDP of the four BRIC economies—Brazil, Russia, India, China—could overtake the combined GDP of the G-7 countries by 2039. These days, they say it could happen by 2032.11 The current global recession makes them more, not less, confident.
Global power is, above all, dominance over ideas, agendas, and models. The revelation that much of the financial innovation that occurred in the last decade created little more than a house of cards erodes American power. Selling American ideas to the rest of the world will require more effort from here on out. Developing countries will pick and choose the economic policies that best suit them, and with growing confidence. “The U.S. financial system was regarded as a model, and we tried our best to copy whatever we could,” said Yu Yongding, a former adviser to China’s central bank, in late September 2008. “Suddenly we find our teacher is not that excellent, so the next time when we’re designing our financial system we will use our own mind more.”
The Last Superpower
Even before the financial crisis, many observers and commentators looked at the vitality of this emerging world and concluded that the United States had had its day. Andy Grove, the founder of Intel, put it bluntly. “America is in danger of following Europe down the tubes,” he said in 2005, “and the worst part is that nobody knows it. They’re all in denial, patting themselves on the back as the Titanic heads straight for the iceberg full speed ahead.” Thomas Friedman describes watching waves of young Indian professionals get to work for the night shift at Infosys in Bangalore. “Oh, my God, there are so many of them, and they just keep coming, wave after wave. How in the world can it possibly be good for my daughters and millions of other