- The Washington Times - Tuesday, September 23, 2008

ANALYSIS/OPINION:

ANALYSIS/OPINION:

OP-ED:

The startling developments of the United States economy over the past two weeks –- the tumbling market and the unparalleled intervention by the federal government to bail out major financial institutions - led President Bush to comment on Friday that “America’s economy is facing unprecedented challenges, and we are responding with unprecedented action.” Indeed, the markets worldwide grew apprehensive in reaction to the developments on Wall Street. I am no expert on financial matters, but hearing the words “confidence,” “overspending,” and “spillover” repeated over and over in nearly every related discussion led me to think about America’s presence on the global stage.

Mr. Bush’s decision to go to war in Iraq, and his changing of a budget that eight years ago had a surplus and leaving it $11 trillion in debt, make him an easy target. He is accused of making reckless policy and ruining America’s good name in the world. But this financial crisis is not one of his making. The greedy bankers who overreached and the consumers who wanted something for nothing are largely to blame. But in any case, this is not the time for beating, blaming or bravado. It is a time for realization, recognition and responsibility.

This moment pains America - and it’s not easy for the rest of the world, either. It was critical for the United States to stabilize its market as quickly as possible to allow the markets to cool down. Treasury Secretary Henry Paulson’s decision to bail out the failed giants has done just that, but his decision appears to fly in the face of the principles of free-market idealism. Moreover, each bailout has veiled the horrifying state of the balance sheets. Right now, many analysts say that no data shows the true depth of the trouble. Congress will have to pass exceptional legislation, giving the government the unequivocal authority to purchase hundreds of billions of dollars worth of bad debt, bail out a troubled financial system and save the sinking housing markets. Out of this experience may come a new monetary institution.

Even before Mr. Paulson made his pivotal decisions, his predecessor, John Snow, argued that an international institution is needed to protect global markets from the unnecessary spill-over effects. “What happens in one place can create serious consequences in other places,” Mr. Snow said at a recent conference on the global economy at the University of Virginia. “Would it not be better if one had a set of rules that contain those risks [so] we don’t put global stability at risk?” Mementos of crises are hard to bear, but there are many successful closures in history. This episode may mark the first of this kind of scale in an age of globalization in the 21st century. But unlike other instances in the past, the winners and losers from this turmoil won’t abandon capitalism and democracy. There is no escaping globalization; the world is more integrated than ever before, and will continue to grow even more so.

With that in mind, this moment may be America’s wake-up call to the fact of globalization. The United States has created nearly all of the institutions and tools of globalization - but recently, it has found it difficult to cope with a situation of its own making. It has isolated itself. For one thing, if it had gotten U.N. Security Council support in toppling Iraqi dictator Saddam Hussein, there would be less resentment toward the Bush White House today. If it had listened to the warnings of the International Monetary Fund about its financial markets, it might have taken some needed measures early on. But America has chosen to do things the only way it knows how. As a result, it lost confidence. It overspent, and both accounts have vital spill-over effects around the world.

This crisis may have humbled America, but it has not defeated it. The rest of the world does not want the United States to fail - because if that happens, the United States will take everyone else with it. In such a closely interwoven world, that would be unthinkable. The world markets have responded positively to Mr. Paulson’s decisions, and he may end up better known than Barack Obama or John McCain by the world elites, with great gratitude and respect.

Tulin Daloglu is a free-lance writer.

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