Global crisis: how far to go? Part I

The huge costs of the crisis, probably more than US$1 trillion in the US alone - or some 7 per cent of US gross domestic income - weaken the second pillar of globalisation also. Not only is the US military already hopelessly stretched, involved in the wars that it can neither lose nor win, but the financial costs of these adventures are mounting. Add to that the costs of the bailout, likely recession and further reduction in tax receipts, and an already weakening dollar, and the financial costs of new American military-led globalisation episodes become unsustainable.

It’s said that Soviet Communism collapsed because of the rebellion of nature: So long as it was cheap to exploit oil and gas, the show continued. The US-led globalisation may come to a temporary halt for more prosaic reasons: indigestion and over-extension, both the common diseases of the empires, from Caesar’s Rome to Bush’s Washington.

Yet, even if the crisis is deeper than currently conventionally expected - a cumulative gross domestic income decline of several percentage points - it will still leave the US as, by far, the most powerful country in the world. In current dollar terms, American GDI per capita dwarfs by more than 20 times the Chinese. Were China to continue growing during the next three to five years at close to 10 per cent per annum and the US to remain mired in recession, the gap would have declined only to 15 to 1.

The US accounts for a quarter of world output, and that share is unlikely to change much.

Finally, the US spends on military more than all the other countries combined. That too is unlikely to change. Thus, the relative setback to the second pillar of globalisation must be seen in context.

The crisis would likely, particularly under an Obama presidency, lead to a much more self-centred America that would try to limit its external commitments and get its own house in order first.

Rather than fear such semi-isolationism, both the US and the world should welcome it. For the US is generally regarded, in global opinion polls, as both the country with the strongest “soft power” of attraction and the one that’s the gravest danger to world peace. An America that works more on its soft power - better education and health systems, stronger protection of the poorest and greater openness to multiculturalism - will be a better country to live in, attract more talent from abroad and create more goodwill in the world.

A US turn to semi-isolationism will make the world safer and more peaceful, sparing the globe unnecessary conflict, phoney Crusades and blatant disregard of the United Nations. So rather than wringing our hands at this crisis, one should see it for what every crisis is - an opportunity for a new and better start.