Why the Countries Should Embrace Trade—and Each Other
Why the Countries Should Embrace Trade—and Each Other
Just because a U.S. presidential candidate bashes free trade on the campaign trail does not mean that he or she cannot embrace it once elected. After all, Barack Obama voted against the Central American Free Trade Agreement as a U.S. senator and disparaged the North American Free Trade Agreement (NAFTA) as a presidential candidate.
In the wake of the financial crisis of 2008 and the Great Recession that followed, many economists worried that even if the U.S. economy improved, unemployment would remain high for years to come. Some warned darkly of a “jobless recovery.”
Assessments of how governments and international organizations have dealt with global challenges often feature a familiar refrain: when it comes to funding, there was too little, too late. The costs of economic, social, and environmental problems compound over time, whether it’s an Ebola outbreak that escalates to an epidemic, a flood of refugeesthat tests the strength of the EU, or the rise of social inequalities that reinforce poverty.
Ever since the emergence of mass democracy after World War II, an inherent tension has existed between capitalism and democratic politics; capitalism allocates resources through markets, whereas democracy allocates power through votes.
The historian Frank Trentmann has written the first total history of consumption. Empire of Things is an original, ambitious account that begins in the fifteenth century, spans the globe, and examines a wide range of regimes, from liberal democracies to fascist dictatorships. The book could hardly be more relevant: since the Great Recession began in 2007, the world has been mired in a global economic crisis with the consumer at its core. As inequality soared in the years leading up to the crash, middle-class consumers, in the absence of rising incomes, relied on credit to sustain their standards of living. Sensing an opportunity, banks and other financial firms began selling mortgages to people who could not afford them.
In recent years, many discussions of the Russian economy have opened with an old joke. In the mid-1990s, John Major, the British prime minister, askedRussian President Boris Yeltsin to characterize Russia’s economy in one word. “Good,” Yeltsin said. Major, seeking more detail, asked him to elaborate in two words. Yeltsin replied: “Not good.”
When U.S. President Barack Obama joined other global leaders at the G-20 summit in Turkey in November 2015, the United States was in the final stages of a multiyear effort to secure the approval of a set of important reforms to the International Monetary Fund.
At a debate among the Republican presidential candidates in March, U.S. Senator Ted Cruz of Texas boiled down his campaign message to its essentials: “Here’s my philosophy. The less government, the more freedom. The fewer bureaucrats, the more prosperity. And there are bureaucrats in Washington right now who are killing jobs and I’ll tell you, I know who they are. I will find them and I will fire them.”
Now, almost a decade after the Great Recession hit, the story of its origins and course has become familiar. It began in December 2007, soon after the U.S. housing bubble burst, triggering the widespread collapse of the U.S. financial system. Credit dried up, as banks lost confidence in the value of their assets and stopped lending to one another.
Today, there is essentially one accepted narrative of the economic crisis that began in late 2007. Overly optimistic homebuyers and reckless lenders in the United States created a housing price bubble. Regulators were asleep at the switch.
In the years since the global financial crisis of 2008 engulfed the world and the United States fell into the Great Recession, the panic has subsided and Western economies have recovered to varying degrees.
In every single region of the world, economic growth has failed to return to the rate it averaged before the Great Recession. Economists have come up with a variety of theories for why this recovery has been the weakest in postwar history, including high indebtedness, growing income inequality, and excess caution induced by the original debt crisis.
The two economic developments that have garnered the most attention in recent years are the concentration of massive wealth in the richest one percent of the world’s population and the tremendous, growth-driven decline in extreme poverty in the developing world, especially in China. But just as important has been the emergence of large middle classes in developing countries around the planet.
As China asserts itself in its nearby seas and Russia wages war in Syriaand Ukraine, it is easy to assume that Eurasia’s two great land powers are showing signs of newfound strength. But the opposite is true: increasingly, China and Russia flex their muscles not because they are powerful but because they are weak.
From Wall Street to K Street to Main Street, pessimism about the global economy has become commonplace. The world economy may have finally emerged from the financial crisis of 2008, but according to conventional wisdom, it remains fragile and unsteady, just one disruption away from yet another perilous downturn.
Despite China’s recent economic struggles, many economists and analysts argue that the country remains on course to overtake the United States and become the world’s leading economic power someday soon. Indeed, this has become a mainstream view—if not quite a consensus belief—on both sides of the Pacific.
Despite boasting the most powerful economy on earth, the United States too often reaches for the gun instead of the purse in its foreign policy. The country has hardly outgrown its need for military force, but over the past several decades, it has increasingly forgotten a tradition that stretches back to the nation’s founding: the use of economic instruments to accomplish geopolitical objectives, a practice we term “geoeconomics.”
During the past century, economic inequality in the developed world has traced a massive U-shaped curve—starting high, curving downward, then curving sharply back up again. In 1915, the richest one percent of Americans earned roughly 18 percent of all national income. Their share plummeted in the 1930s and remained below ten percent through the 1970s, but by 2007, it had risen to 24 percent.
To ensure the success of Myanmar's historic democratic transition, the United States should revise its outdated and counterproductive sanctions policy.
Blackwill and Campbell analyze the rise of Chinese President Xi Jinping and call for a new American grand strategy for Asia.
Williams argues that greater U.S. involvement is necessary to enhance the quality and success of peacekeeping missions.
Kurlantzick offers the sharpest analysis yet of what state capitalism’s emergence means for democratic politics around the world. More
In a cogent analysis of why the United States is losing ground as a world power, Blackwill and Harris explore the statecraft of geoeconomics. More
Takeyh and Simon reframe the legacy of U.S. involvement in the Arab world from 1945 to 1991 and shed new light on the makings of the contemporary Middle East. More
Learn more about CFR’s mission and its work over the past year in the 2015 Annual Report. The Annual Report spotlights new initiatives, high-profile events, and authoritative scholarship from CFR experts, and includes a message from CFR President Richard N. Haass.
Read and download »