Watching the live coverage of the US house floor Monday night in Paris was a truly surreal experience. On my cable system I get both French and British news station, and every station from both countries was carrying live minute-by-minute coverage of the vote on the bailout package, waiting in suspense and watching the vote tally. When the bill didn't pass, there was absolute panic over here. The news anchors were absolutely shocked, as were the commentators.
It really underlined how much the European economy still depends on the American economy. As Angela Merkel pointed out yesterday, this crisis is a problem created by the United States, and the United States is the only one who can solve it. So Europe is now in the position of having to sit back and wait for the United States to take some action as it reels from a painful crisis that is not of its own making. As the saying goes, when America sneezes, the world catches a cold. But what happens when America refuses to take any medicine?
After Monday's fiasco, there were plenty in Europe who were heralding it as the death knell of the American century. Tuesday's papers were filled with commentaries saying that the chaos and absurdity of the American political system today has permanently undermined the world's confidence in its lone superpower. Judging by the way the world was transfixed on Monday's vote, and by the degree to which the world economy has been affected by this US crisis (witness this week's bank nationalisations across Europe), it would be hard to argue that Monday marked the end of American world dominance, as some have argued. After all, those who were smugly saying over the weekend that European economies, thanks to tight government control, would not fall victim to this global virus created by the United States certainly had to eat their words on Monday when Fortis was nationalized by the Netherlands, Belgium and Luxembourg. Rather, Monday probably marks the begining of the end of the American empire, a point of no return. Obviously the end has been coming for some time, but Monday may have marked the point of certainty, the sign that officially confirmed to the world that the United States is in permanent and irreversible decline.
There was particular exasperation and shock in Europe over why the bill was defeated. It is acknowledged that nearly everyone in the House of Representatives wanted the bill to pass, but everyone wanted it to pass without they themselves voting for it. The Republicans, facing dim prospects in the upcoming election, were hoping that they could get the unpopular bill to pass without a majority of their party's vote, enabling them to blame the Democrats for its passage. In fact Monday morning, when everyone assumed the bill was going to pass, the GOP had already sent out a press release blaming Democrats for the bill's passage. But then the bill didn't pass. Democrats balked when they saw that the GOP wasn't going to hold up its end of the bargain. The world watched as the US Congress, which has become a largely ineffectual body whose members are forced to engage in nearly perpetual campaigning, stood completely paralyzed by the the system it has created for itself.
In a piece written for yesterday's Guardian, British author and academic John Gray wrote that the crisis has proven the failure of American free-market capitalism under the Bretton Woods system. a conclusion echoed by French president Sarkozy in his speech early this week. "With the nationalisation of crucial parts of the financial system, the American free-market creed has self-destructed while countries that retained overall control of markets have been vindicated," he wrote. "In a change as far-reaching in its implications as the fall of the Soviet Union, an entire model of government and the economy has collapsed."
This analysis is a popular one at the moment in Europe. There have been plenty of historical comparisons made to the fall of other empires, most notably the British Empire, which fell apart when it became massively indebted after World War II and no longer had the cash to maintain itself or its power over the world. Power then went to the nation with cash: the United States. Power, it is now being speculated, will soon pass to the creditor nations such as China and possibly Russia. There seems to be little doubt that once the crisis is over, it will be China that will buy up the wreckage of the US financial system.