The decouple notion is a fallacy; we are all linked together

Early this year, my continental friend wrote a critical piece in his blog about why we, people in the United States, should bring our economic house in order (see here). Now that we are almost at the end of year, it looks like we have been doing that, after a certain amount of pain. The sub-prime crisis, higher petroleum prices, and inflation have certainly brought down our economy to almost a stand-still.

However, there is one point that my continental friend seems to have not foreseen. In his story, he seems to imply that the rest of the world can now go along without the U.S. economic engine. In his own word, “the rest of the world is doing very well and we don’t need the Americans for our economies.”

We don’t? Recent events (see New York Times story here) have shown that with globalization, we all go up and down together, albeit not at the same time. Who would have predicted that, for example, some of the bondholders of subprime loans are in small towns scattered all over the global map. If we are all believers of a worldwide capitalist system, then it is obvious that capital has no borders. My spending affects someone’s income somewhere in the world, who in turn affects someone else, and so on and so on.

There is one point that I am happy to see out of this period. I have never been an advocate of the U.S. as the emergency super locomotive that the rest of the world looks for help. I have also not been and advocate of the U.S. military being the backbone for stability in such a capitalist system. Yes, I predict a disminishing role of the U.S. in those two areas, because, frankly, there is a whole U.S. infrastructure that we need to attend in order to evolve out of a petroleum dependency. It is time for some of our friends to carry more of the burden, including the foreign adventures that shoulder our economies.

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