U.S. Signals New Era for Global Economy
Thursday, April 2, 2009
LONDON, April 1 -- On the eve of a global economic summit here, President Obama delivered an unusual warning Wednesday for an American leader: The "voracious" U.S. economy can no longer be the sole engine of global growth.
The statement signaled a recognition of a new economic era with a less dominant U.S. role. Although Obama said the United States should not miss "an opportunity to lead" the way out of the crisis, he suggested he would not be the globe's financial decider. "I came here to listen," he said, "not to lecture."
His message also amounted to a challenge to world leaders that highlights the core differences expected at Thursday's summit. As more than 20 heads of state write a plan to combat the crisis, major European powers are firmly resisting calls to further open their coffers and cut taxes to spur the global economy.
Such resistance may not have mattered as much in the past. In previous downturns -- including the Asian crisis in the late 1990s -- the United States was by and large the driving force of global recoveries. But in the wake of the current crisis, Obama said, Washington will have to deal with "our long-term fiscal position" and the notoriously low consumer savings rates that for years drove Americans further into debt even as U.S. imports soared.
This time, he said, the rest of the world cannot depend on the "United States being a voracious consumer market."
"Those are all issues that we have to deal with internally, which means that if there's going to be renewed growth, it cannot just be the United States as the engine," he said during a news conference with British Prime Minister Gordon Brown. "Everybody is going to have to pick up the pace."
The sense of a new economic order with the United States sharing the stage is hanging over this Group of 20 summit. In this relatively new forum, leaders of industrialized powers including the United States, Britain and Japan as well as emerging giants such as China, India and Brazil are grappling together for an answer to the global economic crisis.
Nations will produce a communique Thursday with a list of carefully worded prescriptions, including the regulation of hedge funds and more rigorous standards for banks, a move to shed light on the secrecy of tax havens, new ways for regulators in different countries to coordinate their oversight and dramatically increased funding for the International Monetary Fund, according to a draft of the agreement.
Obama noted that faulty financial regulations in Europe and elsewhere contributed to the crisis. But he did not try to deflect the blame directed at Washington and Wall Street, most vociferously by French President Nicolas Sarkozy, German Chancellor Angela Merkel and leaders from developing countries. "Given our prominence in the world financial system, it's natural that questions are asked -- some of them very legitimate -- about how we have participated in global financial markets," Obama said.
It was a candid assessment of the limits to his influence here as he works with other leaders to clean up a mess that began at home, and where more spending in the United States cannot be the only answer.
"We cannot rely on the U.S. being the global locomotive," said Willem H. Buiter, former member of the Bank of England monetary policy committee and a London School of Economics professor. "Those days are gone."
In the 1980s global downturn, the U.S. economy accounted for about one-third of the world's economy, he noted. It now accounts for one-quarter. The U.S. government is also far more indebted than it was in the '80s.