Middle-east Arab News Opinion | Asharq Al-awsat

The next US revolution | ASHARQ AL-AWSAT English Archive 2005 -2017
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The Arab world, which is preoccupied with monitoring the tragic developments taking place in the region, from Syria to Libya, where the regimes are brutally suppressing their own people’s uprising, may not have been paying much attention to one of the gravest crises that the US has faced in decades. This crisis was the so-called “US debt crisis”, and is something that did not just affect Washington but a number of other world capitals as well, causing stock exchanges to hold their breath in fear of a potential global economic collapse that would transcend all other international financial and banking crises, the effects of which would no doubt also extend to the Arab world.

Over a number of days, Washington’s politicians held the economy of the US, and indeed the global economy, hostage, in an exercise of political brinkmanship. In what represented an early start for the battle between Democrats and Republicans – in light of the forthcoming US presidential elections next year – each party attempted to pressurize the other into passing into law its programs and ideologies [in return for an agreement on raising the US debt ceiling]. Therefore, there is nothing surprising in the “Washington Post” newspaper describing this crisis, and the tense negotiations between the two parties to reach a compromise as being a “political circus.” The “Washington Post” report said that the compromise that was finally reached “did not honour anybody” who was involved in the political brinkmanship. It is true that the US public debt crisis, estimated at over 14 trillion dollars, is not something new in the scheme of things, however the fierce public battle that took place between politicians in Washington [on reaching a deal to raise the US debt ceiling], in addition to the current state of the US economy, made things appear different this time, particularly as the US came extremely close to failing to meet its financial obligations. This is something that would have had an extremely negative impact on the US economy, its international standing, and indeed the global economy at large.

The Americans were furious with their politicians [over their failure to reach a compromise], and are more pessimistic than ever before regarding the state of their economy. Perhaps if they were in the same mood of the people of Greece, France of Spain, or in the revolutionary mood of the Arab people, they might have taken to the streets to call for the fall of the regime, or call for a change in the manner that Washington’s politicians were handling the debt crisis and the current economic situation in the country.

Opinion polls show that the American people are concerned about their financial and living conditions because of recession, and are afraid for their jobs (24 percent say they, or at least one member of their family, have lost their jobs, with the unemployment rate in the US today being the highest it has been since the 1930s). They also expressed deep concern about the future of the country, particularly in light of the pressure and problems with regards to the pension and health insurance systems. This undoubtedly portrays a bleak picture of the US today, and it seems mired in problems, to the point that 40 percent of Americans say that the current economic crisis marks the beginning of an economic recession.

What does this mean?

The US is certainly not on the verge of total financial collapse, but it is facing a crisis that may harm its international standing and influence. Today, it is suffering from the [economic] burden of external wars, namely the wars in Iraq and Afghanistan, as well as the war on terrorism, not to mention the consequences of the global financial crisis. There is also a gradual shift in the international balance of power due to the rise of the Chinese dragon and the gradual emergence of India [as an economic force]. China today is competing with the US to lead the global economy, and is considered Washington’s major creditor, after Beijing purchased more than one trillion dollars of US treasury bonds, and also keeps the majority of its foreign exchange reserve in US dollars. This is something that grants China considerable influence in the US, and at the same time, grants its tremendous ability to threaten the US economy.

During the period of the Cold War between the US and the Soviet Union, or between the East and the West, there was the so-called “balance of terror” with regards to the nuclear arms race and each country’s ability to completely annihilate the other should a war break out between the two. Today, the “balance of terror’ between the US (or the West) and China does not rely on military capabilities, but rather economic and financial strength. The West needs China’s economic strength; whilst China’s foreign exchange reserves are already invested in Western countries and markets. As for China, which is today the “factory of the world”, it needs western markets to sell its goods and invest its financial surplus. In view of this equation, each party is capable of financial and economically harming the other, yet at the same time taking such a step would include a measure of self-harm. This is why we saw the state Chinese News Agency [Xinhua News Agency] harshly criticizing the Washington politicians, claiming that US politicians were handing the debt crisis in an irresponsible manner and accusing them of holding the global economy to ransom as part of a partisan political battle.

Where is the Arab world in all what is happening?

It is no secret that Arab funds are invested in American and western markets, whilst many Arab countries keep their financial reserves in US dollars, therefore any major financial or economic crisis in the US would certainly harm the Arab world. The problem is that, at present, alternative markets to the US are limited; Europe is immersed in its own economic crisis, particularly in light of the Greek and Irish financial crises, and the fears surrounding the Spanish, Portuguese, and Italian economics. Japan is also suffering from economic problems today and is trying to overcome the financial consequences of the recent earthquake and tsunami, and the consequent heavy financial burdens of restructuring. It is for this reason that we heard some economists – at the height of the US debt crisis – saying that were it not for the economic problems of Europe and Japan, then many investors would have abandoned the US dollar for other currencies.

There is another dimension to the US crisis in terms of its potential effects on the Arab world, namely that Washington – immersed in its own problems – will perhaps not be able to provide financial or economic support to Arab popular uprisings, nor will it be able to play a genuine role in the peace process, particularly in light of the forthcoming US elections and the preceding US presidential election campaigns, that have started very early this time. All signs seem to indicate that the US economy will be given priority above all else.

Although the Washington politicians managed to reach an agreement on raising the US debt ceiling, the US debt crisis still remains, and the confrontation between the Republicans and Democrats will be even fiercer in the forthcoming period. American voters are extremely dissatisfied with the behaviour of their politicians, and they are not concealing their fears about their future in light of the suffocating economic crisis. The American voters do not know where to lodge their protest votes at the forthcoming elections, particularly if Washington does not manage to solve its debt crisis. As for the rest of the world, it will hold its breath once more during the US elections if Washington fails to solve this crisis and remains in a state of recession, whilst its politicians play a game of “Russian Roulette” with the global economy.