EDITORIAL: International doubts

By | Thursday, September 25, 2008

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The Bush administration's attempts to address the economic crisis by proposing a $700 billion bailout for troubled financial institutions has received tepid reviews by the international community. Doubts persist about the viability of the plan and the overall well-being of the U.S. economy.

There is an increasing decline in confidence in America's ability to remain true to its guiding principles of free enterprise, fair play and law and order. "The reason why foreigners invest the money in the U.S. is because it's the fairest economy in the world," said the president of Merk Investments, Axel Merk. He questioned the tendency to abruptly change course in difficult moments. If "the financial institutions' rules change by the minute, why on earth should you have your money in the U.S. if you are a foreigner?" Mr. Merk asked.

Despite President Bush's attempt to reassure world leaders at the United Nations on Tuesday, many remain deeply concerned. French President Nicolas Sarkozy said that the situation is "the most serious economic crisis that the world has experienced since the 1930s." A joint statement by finance ministers and central- bank governors from G7 countries applauded the rescue package and promised to take whatever actions necessary to help. However, France, Germany and Japan have indicated they will not take the same extreme measures as Washington. British Chancellor of the Exchequer Alistair Darling said that the credit crisis required "global solutions ... not a knee-jerk reaction."

The emerging international consensus appears to be that the bailout package might have some benefit, but it will not resolve the systemic problems that plague the American economy. The U.S. government debt as a share of the economy is nearing a 50-year peak - and this is likely to increase as baby boomers age.

The Bush bailout is perceived as a band-aid to complex economic problems that cannot be solved by simply shifting the financial responsibility onto taxpayers. The very foundations of American capitalism are being tested in this crisis. By changing the rules rather than letting bad investors reap the consequences for their actions, the Bush administration is telling the world that America no longer has a fair and free economy: We make up the rules as we go.

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