This morning I came across the term 'The Great Recession' for the first time (click on the post title to read an article in The Washington Times that uses this term). American friends who are no doubt only too familiar with the term will have to pardon my ignorance. Australia is, as far as I am aware, the only developed country not to experience an economic recession as a result of the Global Financial Crisis, a state of affairs largely attributable to the very conservative (or so it seems by international standards) regulations our banking sector operates under in terms of capital that must be held in reserve against loans, and the bouyancy of our primary exports to China, which underwrites consumer confidence and spending (not to mention a governmental economic stimulus package which was probably overdone and maybe even unnecessary). Of course, we know the rest of the developed world is doing it tough, but perhaps because of our own present economic security and the relative isolation our distance from the rest of the world imposes on us, we just don't realise how tough.
The possible meltdown of the European Economic Community though Greece nearly defaulting on its sovereign debt payments, closely followed by both Spain and Portugal's looming crises, has been dominating the foreign headlines here, but oddly the situation of the US has received little or no attention in our press, perhaps because of an assumption that the US is too big an economy to go down. But, as the American press informs us, it now appears that, for the first time since the Great Depression that followed the stock market collapse of 1929, the American population are collectively receiving more money from their government in the form of welfare and unemployment payments than they are returning to it in the form of taxes. Given the state of the US government's balance sheet, that is obviously a situation which cannot last indefinitely.
As I heard one American financial pundit say on the radio, if there is no economic turnaround in the next 12-24 months, the consequences do not bear thinking about. Not the least of these consequences, he said, is that without an economic renewal the US cannot afford to pay down its foreign debt. Here's the kicker: much of that debt has been incurred over the last twenty years to finance consumption and speculation rather than to capitalise businesses and improve the means of production, so the means of effecting the sorely needed economic renewal may not be to hand. This is an ominous development.
If the 19th century was the British century, the 20th century was definitely the American century, and not co-incidentally, the final nail in the coffin of British decline was driven by the burden of its debt to the US incurred in WWII. But now, barely a decade into the 21st century and only twenty years after winning the Cold War, it already appears that American dominance in the world is receding, and once again a debt burden is the presenting cause.
Not that I greet this prospect with any joy, mind you. I am unashamedly, but not uncritically, pro-American; a firm believer that, on the whole, American hegemony in the world since WWII has been for the greater good. It is almost impossible for Australians of my generation to imagine a world without American leadership in the economic, political and cultural spheres. But whether we can imagine it or not, the reality of this new world order may, sooner than we think, be before our eyes.
This could be a Great Recession in more than an economic sense, it may signal a Great Recession of American power in the world. Some people may relish that prospect, but they should pause to ask the question, who will fill the vacuum? The US has been a particularly benign and generous super-power; those lining up to take its place may not be so magnanimous.
We at the old manse are thinking of and praying for our American friends and readers. May God in his gracious providence bless and protect you, your families and your country at this difficult time.