On the eve of important elections, the United States is hurting more than anyone lets on. How will this affect the rest of the world?
At the moment, the US remains the largest buyer in the global economy. But it is currently consuming about USD 800 billion more than it is producing, and households spend around USD 500 billion more than they earn. The country also suffers from negative savings and a low rate of investment; indeed, a substantial amount of the savings and investments of the global economy has now shifted to Asia. As a result, the US on a daily basis borrows around USD 3 billion from the rest of the world, largely by selling US treasury bonds. It is this buying and borrowing that is keeping the country’s economy apparently robust, but it is a process that is far from sustainable. There is also a large chunk of US dollars remaining outside the US. While Japan currently has around USD 1 trillion in American currency, China and Saudi Arabia are not far behind. To manage its increasing debt, there is the possibility that the US will be forced to trigger a devaluation of the dollar, along with raising interest rates in the US. Each of these could have a drastic impact on the global economy. None of this means that Americans themselves have been insulated from the growing problems. The war in Iraq and the larger ‘war on terror’ have sapped funding for social-sector expenditure, including for education and health care. When Hurricane Katrina ripped through New Orleans in August 2005, the myth of the American dream was exposed for all to see. The rising tide of economic growth had obviously failed to lift the boats of the poor. An estimated 37 million of the country’s 300 million people are poor in the US, many of them people of colour; at 12.7 percent, that poverty rate is the highest in the developed world. Inequality, too, is on the rise. The US’s Gini index, a measure of income inequality, is the highest in the developed world. An American chief executive now earns 300 times the average wage, tenfold more than in 1970. Other indicators of economic vulnerability include the proportion of people working, and the stagnation of middle-class income levels. Additional oil price hikes could easily exacerbate the economy’s condition. The current state of affairs has not been lost on the American psyche. A recent survey found that more than 60 percent of US citizens are sceptical of free trade. Another survey found that nine out of ten worry about their jobs going overseas. The American dream has indeed arrived at the crossroads.
Romila Thapar addresses invitees at the
Southasian relaunch of Himal Southasian,
IIC, New Delhi, January 2013.
The archive: 25 years of Southasia
China, Southasia and India
On May 19 2013, newly appointed Chinese Premier Li Keqiang arrived in New Delhi for a series of meetings with Indian Prime Minister Manmohan Singh. The visit is Keqiang's first outside of China since assuming power in March.
From our archive:
Purna Basnet discusses Chinese engagement in Nepal vis-a-vis security issues in Tibet and broader geo-strategic plans in Southasia (April 2011).
Fatima Chowdury relates the story of Calcutta's Indian Chinese community through the lens of political and economic upheavals in Southasia and China (May 2009).
Simon Long notes the importance of the Sino-Indian relationship for the rest of Southasia (September 2006).
J.N Dixit ruminates on the strategic concerns of the 'Middle Kingdom' in the wake of India's 1998 nuclear tests (June 1998).