Global

Disruption of the global economy, can we restore confidence?

Ryan Derham
Co-Global Editor

Although the government shutdown has ended, during the crisis, United States citizens were primarily preoccupied with a labor and economic crises facing them, but this shutdown also poses problems globally. Many departments that administer U.S. global relations still ran, but this does not mean that all is well regarding international relations. The departments included the State Department and Consular Operations. Homeland Security continued with 86 percent of its staff. This meant that the Coast Guard and Border Protection remained in tact. So, the “essentials” were covered, but since the shutdown stretched over two weeks, tourism revenue was threatened. Tourists planning trips to the U.S. may have reconsidered because many museums and national parks were closed. Additionally, this extended period of time caused foreign investors to lose faith in the stability of the United States economy. This is the issue which is most pressing post-government shutdown.
According to The Telegraph, one month of the shutdown lowers GDP for the quarter by about 4 percentage points. From the point of view of Britain, they have lost confidence in the effectiveness of the U.S. government. The worst fear was that the national debt ceiling would explode as a result of higher interest rates and borrowing costs. But, the situation does not need to be that extreme for the effects to be felt. Because Britain exports the majority of their goods to the US, prices for these goods have shot up. Britain can expect to lose profits on these goods and expect lower rates of revenue from United States tourism. The rest of Europe has similar feelings because the economies of these countries are so intertwined.  France is put in a sticky situation. As they have just come out of their own recession, economic recovery will be slow.
Just as other countries are dependent on the United States, we too, are dependent on them. Our national debt is funded global credit and foreign purchase. Despite the UK, which is heavily dependent on finance, the entire global economy should be as nervous as they are. Should the global credit shift, everyone is affected. While the shutdown has now ended, we should still be wary of repercussions at home and abroad.
Economic sustainability is dependent on super power countries like the United States in which other countries invest. But, despite these negative consequences, there are also feelings of confusion and animosity building between the peoples of these foreign nations and the Unites States. Public Radio International sought to explore some of these notions abroad by talking to ex-patriots. In Beijing, the media has taken over the issues, saying that the US is “recklessly endangering the global economy.” In Mexico City, people are confused as to why their world’s wealthiest country would shut down the government. Mexico depends on the United States for 80 percent of its exports. In Mumbai, many people have questions as to what the shutdown means and what the impact will be. Greece is confused as to how lawmakers, morally, could take over the government like this. Elsewhere in Egypt and Peru, citizens remember that the United States is not as untouchable and supreme as people may have thought. These countries have faced civil war and mass poverty, yet the United States created their own crisis.
China had begun making provisions for the worst. They were working to create an international reserve currency that would act towards bypassing and replacing the dollar. China would opt for more bilateral agreements, leaving the U.S. in a tight spot for funding domestic departments. The International Monetary Fund (IMF) met despite opposition in order to call for an agreement. Members within IMF see that confidence in the US market will be difficult to restore. In an already fragile global economy, the United States is allowing the blow to developing countries to widen even more. If the UK and France, as developed countries, are in fear of collapse, with each passing day the destruction to the developing world increases.
It seems that the time for big business has finally passed, and they too can fail. Following a long shutdown, countries may be more likely to become more independent instead of turning to the global economy for help. Additionally, returning to the states of Peru and Egypt, that the U.S. has created a problem out of nothing. No civil war or mass bombings are occurring, yet we still find ways to make the front pages of newspaper’s abroad. No country should have this amount of control over the future of our domestic or global economy. It was resolved relatively quickly and the impact on the global economy is not the worst-case scenario. But, as each day passed there were significant effects. Maybe it is time for a new era, a new world super power. If confidence cannot be restored by the people within the country, how can we ever ask Britian, France, China or any other country to trust the United States again?

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