There is a way America can have a viable market economy again
09:12, June 02, 2010
By John Milligan-Whyte and Dai Min
America and China's economies, policymakers, businesses and people unexpectedly began a new era in their relationships on September 16, 2008, when Federal Reserve Chairman Ben Bernanke and Treasury Secretary Paulson told the world that America's financial system would collapse if the American government and taxpayers did not provide U.S. 800 billion in emergency funds immediately. The emergency bailout revolutionized the American government's commitment to a market economy and turned the American government into the largest shareholder subsidizing the commercial failure of formerly non-state-owned leading global American banks, insurance and auto companies. The failed laissez-faire economic theory, which American policymakers still demand China adopt, has been replaced in America by a new era of massive American government control of market forces.
However, the American government's emergency debt and increasing deficit spending based interference in irresistible economic market forces will not be enough to create sustainable economic recovery or recreate America's market economy. There are many obvious reasons, but two are both more important and the keys to coping with and then managing the others: The growing total size of the financial crises damage to America and other nations' financial and economic systems is both larger than the American economy can cope with and is unquantifiable. That reality currently makes investor and business confidence vital for recovery impossible. For example, look at the first stage in the crises. Just before America's economy and banks catastrophic mismanagement became globally self-evident America's housing sector's market value was US 594 trillion dollars. Its market value declined 25 percent or US 148.5 trillion dollars in the first twelve months of the financial and resulting economic and unemployment crises. As a result of these inter-acting crises global investor and business confidence is being relentlessly undermined by uncertainty. The damage from the financial crisis caused by the drop in the market value of the American housing sector is too big to be controlled by the current policies of President Obama's administration, which in fundamental ways is continuing America's conventional policies towards China. The annual combined global gross domestic product of world's 194 nations was approximately US 60 trillion dollars in 2008. The global economy is rapidly and uncontrollably degenerating. It is already beyond the ability of any individual government or group of uncooperative governments to safely govern either their economies or nations.
There is only one way that President Obama can enable America's economy recovery to begin, and restore investor and business confidence and America's sustainable market economy. He must become what we will term the "Deng Xiaoping of America." Deng Xiaoping saved China from economic collapse in 1978 caused by disastrous economic policies from 1966 to 1976 by implementing very unconventional policies in China. They gradually became known as "capitalism with Chinese characteristics" which is now conventional Chinese policies because the Chinese see clearly that they work. Like Deng Xiaoping, President Obama is an exceptionally gifted leader who looks for truth in facts and must find and implement unconventional policies for America's policymakers, business decision makers and labor leaders. That is what his election by the American people and his extraordinary mind and determination make possible. He is a different sort of man from conventionally minded American policymakers. He must save America from failure as President Washington, Lincoln, Roosevelt and Kennedy did in the 18th, 19th and 20th centuries were. Chinese policymakers want to help President Obama and the American people, who they admire, for the same reasons Deng Xiaoping's contemporaries ultimately supported his unconventional search for a successful future.
The articles in this column represent the author's views only. They do not represent opinions of People's Daily or People's Daily Online.
John Milligan-Whyte and Dai Min are the executive producers and co-hosts of the Collaboration of Civilizations television series adapted by the eight books they wrote in the America-China Partnership Book Series published in English and Mandarin in 2009-2010. They founded the America-China Partnership Foundation and Forum in 2008 and the Center for America-China Partnership in 2005. E-mail: info@CenterACP.com