In most of my research involving economics around the world, one item became clear very early in this election cycle-not only Democrats fear GOP amoral, unprincipled policies. The rest of the civilized world has a lot riding on the US election, and actually fears Republican economic policies. We Americans should be in control of our own destiny, be it bad or good, but I totally understand their trepidation.
Nonetheless, they have a great deal at stake in the result. Overwhelmingly, non-US citizens favor Barack Obama’s re-election over a victory for his challenger, Mitt Romney. There are good reasons for this.
In terms of the economy, the negative effects of Romney’s policies (which depends on which crowd he’s speaking to) would continue creating a more disparate and divided society and would not be directly felt abroad. But, for better and for worse, others have often followed America’s example. Many governments quickly mimicked Ronald Reagan’s propensity for deregulated markets. Unfortunately, those policies eventually brought about the most severe global recession since the 1930s. The countries that followed America’s lead have experienced the same growing inequality as the U.S. and the disparities that come with those policies:
- More wealth at the top
- More poverty at the bottom
- A weak middle class
Romney’s proposed contractionary policies – the attempt to reduce deficits prematurely, while the US economy is still frail – will almost surely suffer the same results that are currently taking place around the globe:
- The UK’s economic policy has been roundly criticized but economists around the world. They were solidly on the road to recovery when conservative David Cameron added the UK to Europe’s austerity train and the UK slid back into recession in merely six month’s time.
- The 17-country Euro zone has weakene to point that three of the countries are in full-blown depressions with 25% unemployment and contracting economies while even powerhouse Germany is finally beginning to question Angela Merkel’s sanity in continuing to insist on austerity when it is clearly the wrong strategy for the conditions “on the ground.” Spain is the worst off of all the Euro zone countries with 51% unemployment among the 18-35 yr old age group and 26% unemployment overall in the 12th largest economy in the world.
- If Romney’s or Ryan’s plans were implemented, America’s already anaemic growth, and, assuming the euro crisis does not radically change, it would almost assuredly bring on another worldwide depression. At that point, with US demand shrinking, the rest of the world would indeed feel the economic effects of a Romney presidency quite directly.
The Global Effects of GOP Recklessness
All of which raises the question of globalization, which entails coordinating concerted action on many fronts by the international community. But what is required with regard to trade, finance, climate change and a host other areas is not being done. Many people attribute these failures partly to an absence of American leadership. But, while Romney may summon bluster and strong style, other world leaders would be unlikely to follow him, owing to the belief (correct in my judgment) that he would take the US – and them – in the wrong direction.
American “exceptionalism” may sell well at home, but it does feebly abroad. President George W Bush’s Iraq war – debatably a violation of international law – showed that though America spends almost as much on defense as the rest of the world combined, it could not pacify a country with less than 10% of its population and less than 1% of its GDP.
Moreover, it turned out that US-style capitalism was neither efficient nor even. With most Americans’ incomes stagnating for a decade and a half, it was clear that the US economic model was not delivering for most citizens, regardless of “official” GDP data, especially under George W. Bush who, we now know, fought two wars “off-book.”
Undeniably, the model blew up even before Bush left office. Together with the abuses of human rights under his administration, the Great Recession – the predicted outcome of his economic policies – did as much to weaken America’s soft power as the wars in Iraq and Afghanistan did to weaken the integrity of its military power.
GOP Indifference to U.S. Progress
In terms of values, the values of Romney and his running mate, Paul Ryan, things are not much better. For example, every other advanced country recognizes the human right to accessible health care, and Obama’s Affordable Care Act represents a considerable step toward that goal. But Romney and the Republican Party has criticized this effort, and has offered nothing in its place.
The U.S. now has the dubious distinction of being the most advanced country that affords the least equality of opportunity to its citizens. And Romney’s drastic budget cutbacks, targeted at the poor and middle class, would further obstruct social mobility. At the same time, he would expand the military, spending more money on weapons that do not work against enemies that do not exist, elevating defense contractors like Halliburton at the expense of desperately needed public investment in infrastructure and education.
Romney has not only failed to distance himself from the Bush administration’s policies, on the contrary, his campaign features :
- The same advisers
- The same devotion to higher military spending despite no requests from the Pentagon
- The same belief that tax cuts for the rich are the solution to every economic problem. and
- The same fuzzy budget mathematics that have been proven not to be accurate by multiple independent sources
Regarding financial regulation, while the recent crisis has highlighted the need for stricter rules, agreement on most issues have proven to be obscure, partly because the Obama administration is simply too close to the financial sector. But with Romney, there would be no distance at all: figuratively speaking, he is the financial sector.
One financial issue on which there is global agreement is the need to eradicate offshore bank havens. These safe zones exist mainly to provide safe havens for tax evasion and avoidance, money laundering and corruption. Wealth does not flow to the Cayman Islands because sunshine makes it grow faster; this money thrives on the absence of sunshine. But, with Romney unapologetic about his own use of Cayman banks, we are likely to see proliferation, if anything, in this area.
On the issue of trade, Romney promises to launch a trade war with China, and to officially proclaim it a currency manipulator on Day One – a guarantee that gives him no alternatives but to follow an extremely ill-advised path.
Romney refuses to understand that the yuan’s large real appreciation in recent years, or to recognize that, while changes in China’s exchange rate may affect the bilateral trade deficit with China, what really matters is America’s multilateral trade deficit with all U.S. trade partners. A stronger yuan would simply mean a switch in the US from China to lower-cost producers of textiles, apparel and other goods.
The irony – again either lost on or ignored by Romney – is that other countries are accusing the US of currency manipulation. After all, one of the main benefits of the Federal Reserve’s policy of “quantitative easing” – perhaps the only channel with a significant effect on the real economy absent needed fiscal policy changes– originates from the depreciation of the US dollar.
The world has a lot riding on America’s election. Unfortunately, America’s electorate is one of the most under-informed, easily manipulated, and stubbornly racist electorates in the free world.