Waiting for next `conductor' of global economy

January 29, 2008|By TRUDY RUBIN

DAVOS, Switzerland -- During the 11 years I've attended the World Economic Forum here, the United States has been lionized as the world leader and economic giant, home of high-tech wizards. When the high-tech bubble burst, deficits rose and the Iraq war went sour, the shine on the American model dimmed. But few here used to question America's role as the world's sole leading power.

However, Davos 2008 has laid bare a world in which no superpower seems to be in charge. The unipolar American moment is deemed over - in part a casualty of Bush political and economic policies, in larger part the result of global economic changes that are shifting wealth elsewhere.

But we have not entered a multipolar world: China and India, though on the rise, aren't ready to take the global lead, nor can Europe do so. The consensus at Davos seems to be that we now live in a nonpolar world, with America too strong to stand on the sidelines but too weak to implement its agenda alone.

The current U.S. financial crisis grew out of years of massive lending for subprime mortgages during a housing bubble. The collapse of the bubble has undercut banks and revealed serious flaws in the entire U.S. financial system. Harvard economist Kenneth Rogoff said here that "we're looking at a situation where the plumbing of the U.S. system is deeply damaged because of the lack of transparency. That's not going to easily sort itself out."

These practices, in addition to foreign policy failures such as Iraq and domestic debacles such as Hurricane Katrina, create an image of American incompetence. What makes the situation so acute, in foreign eyes, is that it comes at a time when the United States is massively in debt to China and oil-rich countries such as Russia and the nations of the Persian Gulf. As America cuts interest rates to keep banks solvent, the dollar becomes less attractive to those countries that are keeping America afloat. Yet our ailing banks need their capital.

All this debt and a falling dollar make the U.S. look like a Third World country.

An acronym floating around Davos this year is BRIC, which stands for Brazil, Russia, India and China, countries where income and hopes are rising steadily. Higher oil prices have made countries such as Russia (not to mention Iran and Venezuela) indifferent to U.S. pressures.

What was also stunning at Davos was the growing self-confidence of Asian nations (except for Japan, which stayed much on the sidelines). China now sends to Davos large numbers of English-speaking entrepreneurs who are investing globally and mix on equal footing with top Western executives.

"It's remarkable how few have noticed we are entering an entirely new era of history - the rise of Asia," said Kishore Mahbubani, dean of Singapore's Lee Kuan Yew School of Public Policy.

He talks of an Asian continent where young people "are convinced they will do much better than their parents" - which used to be the American mantra. And he asks how long Europe and America could continue to control most international institutions given this surge of Asian economic growth.

Yet, for the most part, I heard little triumph about America's dimming role. None of the rising powers is ready for global leadership. International institutions have little power. And without a conductor to lead the global orchestra, there will be no concert.

Trudy Rubin is a columnist for The Philadelphia Inquirer. Her column appears Tuesdays in The Sun. Her e-mail is trubin@phillynews.com.

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