American Eclipse?

Gideon Rachman – The Financial Times

Bits of two FT columns:
Gideon Rachman :
…I have just spent the past two weeks in China and India – and it is clear that the thought has occurred to many people there. Whatever the long-term economic impact on Asia of America’s financial crisis, a psychological shift is already evident.
The success of the Beijing Olympics in August and the failure of Wall Street in September has been a boost to Chinese self-confidence.
Pan Wei, director of the Center for Chinese and Global Affairs at Beijing university, mused aloud to me that: “My belief is that in 20 years we will look the Americans straight in the eye – as equals. But maybe it will come sooner than that. Their system is in chaos and they need our money to rescue them.”
India is poorer than China and does not feel the same sense of strategic rivalry with the US. But in India as well, the old inferiority complex towards the US is eroding.
At Infosys, a Bangalore-based information technology company that has become the symbol of India’s economic revolution, a senior manager says that one of the reasons that the group has built a plush US-style headquarters – with expansive lawns, libraries and gymnasiums – is “so that our people don’t feel over-awed when they visit American companies”.
Far from being over-awed by American business at the moment, senior Infosys executives are watching events on Wall Street with a certain wry amusement. One board member notes that his company’s London offices are in Canary Wharf, right next to the headquarters of newly bankrupt Lehman Brothers, and jokes: “The good news is that Lehman Brothers had a lease for four years. The bad news is that it was insured with AIG.”…
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…It is fascinating to look back at the Financial Times of 30 years ago, just before the US and the UK embarked on their years of liberalisation and deregulation. The similarities between 1978 and 2008 are striking, as if the two years are bookends to the fantastic stories in between.
Britain in 1978 was presided over by a prime minister mocked for his failure to call a general election. James Callaghan had “lost the authority to govern”, Margaret Thatcher, the opposition leader, said after Callaghan announced that he would not, as expected, go to the country in the autumn.
There was an unpopular and apparently ineffectual president in the White House, although, 1978 not being an election year, Jimmy Carter still had more than two years in office.
The leader of Zimbabwe was squabbling with the opposition about forming a coalition government, although the country was called Rhodesia then and the two protagonists, Ian Smith and Joshua Nkomo, were eventually eclipsed by Robert Mugabe.
It was not all gloomy, then as now. The FT reported “euphoria in the fine arts salerooms”, with record auctions at Sotheby’s and Christie’s, and told women that the look at the Paris fashion shows that year was “straight and narrow”.
The difference then was that no one realised how bad things were about to get. Thirty years ago today, the FT’s editorial was headlined “A brighter background”, saying that UK prospects looked reasonable, provided “we get through the winter without too much economic bloodshed”.
A little over three months later, Britain was plunged into its icy winter of discontent, with half-empty supermarket shelves and rubbish piled in the streets, as road hauliers, hospital workers, school caretakers and many others went on strike.
A few months after that, President Carter delivered his famous “malaise speech”. He never actually used the word “malaise”, just as Callaghan did not say “Crisis? What crisis?” But Mr Carter did say the US was undergoing an ordeal “deeper than gasoline lines or energy shortages, deeper even than inflation or recession”. It was a crisis of confidence that is “threatening to destroy the social and the political fabric of America”.
It was an extraordinary speech. What US president today could get away with saying “we’ve learnt that piling up material goods cannot fill the emptiness of lives which have no confidence or purpose”? Mr Carter did not get away with it either. The US was soon headed by Ronald Reagan, Britain by Mrs Thatcher, and the Anglo-American revolution was under way. People were assured there was nothing wrong with piling up material goods, or homes, and they set about it using borrowed money.
New York and London, exuberant, creative and open, sucked in the world’s brightest, creating financial instruments so sophisticated that few outside Wall Street and the City could understand them. We now know that many of those inside the banks did not understand them either.
Mr Steinbrück said last week: “The US will lose its status as the superpower of the world financial system.” Is he right? I do not think so. The locus of business power may shift. It already had before this crisis, with Lenovo of China buying IBM’s personal computer business and Tata of India taking over Jaguar.
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