Last week, we examined what effect on American society could be expected from the current financial crisis. The effect on America's global prestige, power and influence is also an issue. It is a question to which Oliver Kamm of The Times and Michael Knigge of Across the Pond turn.
Knigge examines critically the argument that the effect will be a decline in American power, relative to Europe's:
"Herold's analysis ... proclaims Europe one of the major winners in the international power reshuffle: It doesn't matter who wins the election and becomes president, McCain or Obama. Whoever it is will have to seek common ground with Europe – and not with a particular European country - a position that George W. Bush felt was good enough - but with Europe as a supranational power, writes Herold.
"Hence, Herold argues, after the failure of the Bush model, it is now the up to the Europeans, who rightfully have complained for a long time about American unilateralism and hubris, to confidently present their solutions for the global challenges the West is facing.
"According to Herold, the financial crisis has brought the EU closer together and is in itself a convincing argument that the kind of integration the EU provides is necessary. Europe is back, writes Herold and warns that everyone who doesn't recognize that fact misjudges the signals of the current crisis. That goes for the U.S., but also Russia, whose foreign policy instincts, states Herold, were no less "American," than those of the U.S."
Knigge is sceptical:
"While Herold's analysis that the U.S. is weakened by the financial crisis sounds plausible, his deduction that therefore Europe is one of its biggest beneficiaries isn't. Politics isn't a zero-sum game. Just because, the U.S. loses some of its global stature doesn't necessarily translate into European gains. (Yesterday's historic election results of the CSU and the SPD in Bavaria proved that point.) If the EU's economic and foreign policy, as well as its structural fundamentals haven't changed - and they haven't - then why should Europe be in a better position now then a few weeks ago? What's more, the assumption that Europe, through this crisis, has become more cohesive, for the time being is just that – an assumption that hasn't been put to the test."
Oliver Kamm makes a similar point forcefully. There is no appetite among other countries to take on the tasks that the US performs, let alone to pay for them. The risk of an economic repeat of 1929 is also belied by the fact that so much has been learned since then.
"US power is resilient and will assuredly survive the current ructions in financial markets. Financial crises are a recurring part of a market economy. Among the great insights of J.M. Keynes was that capitalism is cyclically unstable; monetary and fiscal measures are required as automatic stabilisers. Economic management is obviously anything but an exact science; but we learn from the experience, just as policymakers learned how not respond to bank failures from the collapse of Creditanstalt in 1931 and the political catastrophe that followed.
"There will be changes in the financial system as a result of this crisis - the most significant will probably be reduced capital flows to the US, and lower international demand for dollars. I doubt very much that this will augur the replacement of the dollar as an international reserve currency, and in any event a depreciation of the dollar may be quite beneficial to US growth. But the most important aspect of US power is not so much its economic strength as its provision of global public goods. In the absence of world government, the US is the informal guarantor of the international system of trade and payments, and of collective security against military threats.
"There is plenty of grumbling in the rest of the world against US primacy (and also much goodwill towards the US; I found this quite recently in talking to some young Iranians). But there is no appetite among other countries to take on the tasks that the US performs, let alone to pay for them. I would welcome a more united Europe, and I believe a common European currency is a strength for the international system. But I have no expectation that there will be any serious challenge to America's position in the international order - at least not in my lifetime."
