By Arab News
The ground has shifted. The mighty United States has been knocked off its perch as the world’s greatest and most dependable economy. The downgrading of the US economy by Standard & Poor’s from its triple-A status to a mere AA+ is being shrugged off by many as a mere symbolic move. The US itself has dismissed the downgrade as based “on a flawed statistical analysis.” They are probably right. It’s not as though there’s a risk of the US defaulting on its debt, mammoth as it is. Slim chance of that happening anytime soon.
Yet it is not possible to ignore the new stark reality. The world has changed and America does not rule it anymore, at least not as the economic powerhouse that it used to be. More precisely, it doesn’t demand the same respect and trust that it enjoyed until the move by the credit rating agency. But it’s not the Standard & Poor that is responsible for this trust crisis. It has been provoked and precipitated by America’s own reckless ways.
The immediate provocation has, of course, been the recent political bickering and brinkmanship witnessed in Washington over the past few weeks, with the Republicans and Tea Party fanatics locking horns with President Barack Obama over raising the credit ceiling.
Obama isn’t the first president to seek a raise in credit limit. The Republicans including the much-lionized Ronald Reagan did it numerous times. So the Republican posturing was nothing but a shameless pandering to their increasingly shrill gallery. They eventually backed the debt deal. However, America’s economic and political standing has suffered, perhaps irrevocably.
No wonder in its explanation, the S&P notes: “It (downgrading) reflects our view that the effectiveness, stability and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges.”
Of course, the credit ratings agency’s move is only a symptom, not the disease. America’s malaise goes way back and deep. All these years, it has borrowed, borrowed and borrowed to finance and support its profligate ways that have been exacerbated by its numerous military misadventures over the past decade or so.
Even as its economic growth remains stagnant, still suffering from the grievous injuries it suffered in the 2008 meltdown, its spending continues to mount. As if the two disastrous wars in Afghanistan and Iraq were not a drag enough on the economy, the US continues to expand its military presence around the world.
Where do we go from here? The S&P move could have serious cascading effects on world markets when they open today, not to mention the long-term implications for the world economy that is allied to the US economy. What happens to the dollar, the global reserve currency to which various Gulf currencies are also pegged? Russia and China have already called for a new global reserve currency as a weakened dollar threatens the world economy.
These are questions that must be confronted by the international community and fast. Others must not suffer and pay for the reckless actions of US politicians. There are genuine fears of another great crash around the corner. The continuing instability in Europe with Italy and Spain now attracting concerns isn’t helping either. These are uncertain times and we must face them together. The credit ratings move is a loud wake-up call and not just for the Americans.