Actions needed to restore US' image

Most Chinese people believe the United States is still the strongest country in the world, but they no longer envy it as much or believe it to be the best, because it is seen as being in decline.

The US was so highly regarded in the past that China adapted the US model to build its market economy system. The Chinese financial system is more or less modeled on that of the US, so our central banking was reformed into a system of nine regional branches along the lines of the US' 12 federal districts. We also followed the US in separating commercial banking and investment banking and established many financial institutions, similar to those in the US, that now operate in US markets. However, we were wary of copying the US model exactly because of our different stage of development, culture and history.

Compared to most other countries, the US still has the best universities and technologies, but it has not made full use of its assets in the best interests of humanity or its own people. It wastes a lot of resources pursuing what it believes to be right and forces other countries to follow suit. Using all available means, including military force, to promote US ideology, it is breaking the international order it established after World War II. The war in Iraq and other theaters has not only weakened the US, but also ruined its image as a rational, reasonable, peace loving and just country. As a result, it has lost any claim to legitimacy as the leader of the international system.

The US economy's sustainability has also attracted Chinese people's attention. Rapid increases in deficits worry other countries and the response of the international financial market to the recent downgrade of US sovereign credit is a manifestation of this kind of concern.

The downgrade itself and the debt figure are not core problems. What worries the world is that the two parties in US Congress used the debt ceiling issue to fight for their own political interests. They did not care about creditors' concerns or interests or the responsibility the US has for its debts. Although the debt ceiling was raised, the Democrats and Republicans made no real compromises in consolidating the US' fiscal foundations. Without cutting spending and raising taxes in the future, how can the US reduce its debt ratio?

The nation's subprime crisis and economic downturn have already proved that further debt is unsustainable and that the economy cannot always rely on it. However the political elites in the US believe it can always print more money to maintain the status quo; betting on there being no alternative to the US dollar in the international monetary system.

However, if the US government and Congress do not take real and effective measures to restore credit worthiness, the nation will sooner or later loose its hegemony in the international monetary system. The pity is that so far we have only seen words from the US government where action is needed.

There is no doubt the US has the ability to restore its international image and economic strength. It has all the resources it needs and no country in the world is challenging its leading position. The problem is the misperception that the political elites have of their country and its place in the world.

If these powerbrokers were willing to relinquish some short-term interests for the long-term stability and prosperity of the US and the world, we would see a more reasonable international order. And on the basis of fulfilling its responsibilities, the US would still enjoy its leading role in the world.

The author is professor of international economics and deputy director of the Institute of World Economy at the Shanghai Academy of Social Sciences.

(China Daily 10/10/2011 page8)