Tuesday, October 07, 2008

They Don't Need Our Ball

To here progressives tell it, they're the ones with the well-developed world view. Unlike the red states rubes (some of whom don't even have passports!) they travel the world and appreciate the diversity of cultures around the world. They talk about things like "global tests" and "approval of the world" when it comes to foreign policy. They laud the health care systems, transportation options, and secular lifestyles of our European betters. They sigh and complain that if only Americans knew how the rest of the world really operated, we would see the light and abandon our arrogant attitude that we know best.

Which makes their utter ignorance of the world economy so amusing. They call for investigations of US oil companies for "price fixing" even though only a small percentage of world oil reserves are owned by these companies. They call for the Congress to pass laws to prohibit speculation on oil prices even though how such laws would have any impact on the oil futures markets in place like Dubai has never been explained. They call for the closing of "loopholes" that companies use to avoid paying onerous corporate tax rates in the U.S. as if there aren't literally hundreds of other countries where these companies could relocate to with far lower taxes. They call for even more regulation of financial markets and corporate governance as if such previous attempts at regulation haven't already lead companies to abandon New York City for friendlier climes such as London, Shanghai, Singapore, and Dubai.

To be fair, conservatives have engaged in their share of myopic American-centric economic thinking as well when they do things like call for companies to stop doing business in China as if the absence of American firms would somehow punish the Chinese rather than simply rewarding the German, French, Canadian, Japanese, Indian, or Korean companies that are ready and waiting to step into the void. The reality is that if we decide to take our ball and go home, the game is going to go on without us.

In Monday's WSJ, Zachary Karabell explains why:

This should not be a partisan argument. It is perfectly fair to argue that wealthy corporations should pay a greater share of the tax base than struggling middle-class Americans. Fair, but not realistic. The U.S. government can no longer dictate to global capital. Once, when the U.S. was the engine of global growth, when the world needed Wall Street for funding, capital could be taxed and controlled by the fiat of the U.S. government. No longer. The U.S. may have the will; it does not have the power.

The current debate in Washington gives no indication that this reality is understood. Both sides of the aisle are susceptible to a false sense of American economic sovereignty. Companies and countries flush with cash increasingly view U.S. laws, regulations and attitudes as undue burdens. As consumer activity accelerates outside the U.S. and Europe, and as financial centers spring up elsewhere, there is increasingly less inclination and less need for the world to go either to Wall Street or to Main Street.

For now, even with the breakdown of Wall Street, the U.S. remains vital to the global economy. It is the largest market, with a dynamic consumer culture, innovative companies, and is deeply enmeshed in the international system. But it is not the alpha and the omega; it is not the center; and the crisis hitting Wall Street is leading the rest of the world to form bonds that bypass the U.S.

1 comment: