An inward-looking superpower?

The United States of America is undoubtedly the only remaining superpower in the world at this point. This status is obvious because it is by far the largest economy in the world and its military strength is unmatched by any other country. The third important reason is the creativity and the innovation of this capitalist democracy. America became a superpower because of its participation in the two World Wars and its giant exports. This country provided the leadership under Franklin D Roosevelt to a chaotic world and the disintegrating British Empire. Russia under Joseph Stalin refused to accept the American leadership and formed a counter force under the Soviet Empire. Their ideology of central control and authoritarian politics failed to compete in the global marketplace and eventually failed in 1991. Few countries seem to have learnt any lesson from that fiasco, least of all the United States of America.

America is the only ‘Western Democracy’ with a population of 300 million people. There has never been a similar precedent in the history of the ‘Western World’. Throughout its development over the past three centuries, the ‘Western Civilization’ has managed its society by a distinctly idealistic set of rules. This was fine and dandy as long as the populations were small and the recipients were of the ‘White Races’. This concoction saw the rise and fall of different empires in Europe throughout its long history. The rise of the United States of America was not only the result of its abundant natural resources but the relative distribution of the fruits of its bounty. The rise of the ‘Middle Class’ and their access to finance and capital resulted in an unprecedented creativity and innovation. The steady influx of immigrants from Europe and Central and South America kept the creative blood flowing and reinvigorating.

Global trade is the reason that America became richer than other countries. Trade was important to Thomas Jefferson and Alexander Hamilton and therefore it became important to George Washington, John Adams and Benjamin Franklin. To protect the cargo for export and import, American Navy grew in size and power. With the rise of a ‘Blue-water Navy’, America became a global military power. Can you imagine if the United States had not traded with Europe and Asia in nineteenth and twentieth centuries? It would have remained an agrarian power like Brazil. People like Lou Dobbs and Pat Buchanan would have been selling vegetables on the road-side if their parents or grandparents were allowed in this country in the first place. The ‘Western Powers’ suppressed manufacturing and value-added exports by the Asian countries throughout the eighteenth and nineteenth centuries. It was only after World War II that Asia was allowed to export manufactured goods and now the services. The ‘Western World in general and the United States in particular is not ready for such unrestricted competition for long. The protectionist sentiments have been brewing in this country for some time now and finally they have their leader in command.

President Barack Obama is unlikely to promote ‘free-trade’ in the classical sense of the world. What he is likely to peddle is the so-called a code word for ‘managed trade’ that the communist countries used to propagate. Free trade preached by the ‘Western World’ for three centuries has now become ‘Unfair Trade’. Trade can only become ‘fair’ if Americans and Europeans are allowed to write the new rules. Even this would be difficult because what is fair for Americans may not be fair for Australians, Canadians, Europeans and vice versa! First it was the environment, then it was labor laws and now it is currency manipulation, the list of grievances would go on and on. The fact of the matter is that as long as the shoe was on the other foot, everything was fair in trade and war. Now that Asian foot has got the shoe, the ‘Western Bum’ is queasy! If there is no leadership in the world trade, protectionist forces would takeover the crucial globalization agenda. Obama needs to THINK about it!

Who is the leader of the free world?

The answer in America would be, “The president of The United States”, of course! Now you ask the same question anywhere else around the world and the answer would certainly not be George W Bush. Every continent would give you a different answer. The question is why do we have such different perceptions? America has been full of itself and all things American, for the past few decades. The rest of the world admires the United States but then have a life beyond that. The real leader of the free world, in my opinion, is the mighty old ‘Dollar’.

There is a saying that “when America sneezes, the rest of the world catches cold”. It was true then and it is true now. Since January 2008, American Economy has stagnated and shows signs of an impending recession. The world has followed suit. Stock markets around the world have lost 40% to 60% of their market value. The value of the Dollar has plunged to it’s lowest level in decades. Yet, Governments around the world hold the US treasury bills worth trillions of dollars. If dollar was not the leader of the free world, do you think the world would hold their reserves in Dollars?

The Continental Congress had authorized the issuance of dollar coins and currency, even before the Declaration of Independence. The term ‘Dollar’ was commonly used to refer to Spanish colonial 8 real coins or “Spanish Milled Dollars”. On August 8, 1786, the Congress formally approved the dollar by a symbolic resolution. Alexander Hamilton was the first Secretary of Treasury of the United States. It was under his leadership that the ‘Coinage Act of 1792’ was passed, establishing the Dollar as the basic currency of the United States. The US dollar was backed by gold and silver.