America Is Already Politically Bankrupt: "The Blocked World Power"

The Statue of Liberty in New York is
currently closed due to the government shutdown

Says title of the article (and the described picture) by Charly Wilder in Spiegel Online International in which a review of German commentators on the United States government shutdown has been presented. One of the illustrative aftereffects given in the article includes a picture of The Statue of Liberty in New York which is currently lying closed due to the government shutdown. 

"The picture on the cover of German business daily Handelsblatt yesterday fairly well encapsulates the way the US federal government shutdown is being perceived across the Atlantic," writes Charly. The Statue of Liberty stands bound in chains, her torch hand hanging listlessly by her side. Across it reads the headline: "The Blocked World Power." 

Charly has quoted the conservative daily Frankfurter Allgemeine Zeitung as saying: "What Washington currently offers up is a spectacle, but one in which the spectators feel more like crying." This editorial also says that the shutdown is the result of many factors, both ideological and political, and involves huge risk for the US. According to this editorial, "the political establishment in Washington appears to have got rotten to the core driving the world power into a budgetary state of emergency." People are wondering how things could have been allowed to get to this point.

By and large, the Germans describe the shutdown as a "specifically American problem," and a similar government shutdown is ruled out in Berlin, where Chancellor Angela Merkel is currently discussing Germany's federal budget with her prospective coalition partner, the center-left Social Democrats.

According to Charly, Germany's right-leaning daily Die Welt has published an article titled : "The whole world pays for America's shutdown," in which Anton Böner, president of the Federal Association for German Wholesalers and Foreign Trade, has warned : "If the Americans shoot themselves in the foot right now, it is highly dangerous for the entire global economy, and of course for the German export economy."

Gregor Peter Schmitz

The German press, by and large, blames the Republicans for the current deadlock. Gregor Peter Schmitz of Spiegel Online calls their party as 'Kamikaze Party' or "Cocktail Party." Attributing the crisis to the political culture, Schmitz opines that America's mercenary political culture is responsible for the creation of such circumstances in which "a brigade of Republicans conduct themselves like a bunch of Berlusconis - as enemies of the state from within who want to cripple the country because that's the desire of their conservative voters at home."

Charly quotes Nuremberg's Nachrichten as writing: "There are fundamentalists within the world's largest democracy : The hardline wing of the Republican Party is once more crippling the United States. The Tea Party movement does not engage in democracy, but in dogmatism."  Charly also quotes a commentator writing in Collogne's Stadt-Anzeiger about the Republicans: "Here are fundamentalists at work who hold up their country to ridicule to advance their pure doctrine. What a tragedy!" Munich's national Süddeutsche Zeitung offers a slightly more depressing take, writes Charly.

According to this paper, since last few years, the United States - one of the world's oldest democracies - has been the victim of what can be called as politics of 'self-destruction.' The great tragedy is that this work of destruction isn't being wrought by enemies of democracy or greedy lobbyists or sinister major party donors. It is being done by the very people who are supposed to preserve it: the voters, the parties and the politicians."

The Republicans who have brought Washington to standstill are repeatedly and democratically elected by voters and given a mandate to block. The parties themselves are fomenting an increasingly radicalized culture that deepens political, societal and geographic divisions in the country. There are very few politicians in America who are willing or capable of thinking beyond their own electoral constituencies. Charly ends his post with this paper's conclusion: "At the moment, Washington is fighting over the budget and nobody knows if the country will still be solvent in three weeks,"  "What is clear, though, is that America is already politically bankrupt."

America's Shutdown is China's Login

Herbert Walter

Says : the title of today’s post by Herbert Walter, Ex-Chief of Dresdner Bank (who led Dresdner Bank from 2003 to 2009) and a financial wizard, in German Business Daily Handelsblatt.

Commenting on the US shutdown's impact on the Capital markets across the globe, Walter writes that 'current the bizarre financial crisis in the United States' have not much impacted the markets so far because there exists 'apparently unshakable opinion' everywhere that President Barack Obama will get his budget through and ultimately everything will be alright.

According to Walter, a higher debt limit will save the country from insolvency but the solution offered will only be for the short term. The United States faces substantial damage of its reputation through the budget disputes. As a result, Walter foresees an accelerated descent of the country as the number one world power. He feels that "Quite possibly China will take its place in the long run." China has become the world's second strongest economic power in the last 20 years and accumulated huge wealth which is evident from the facts that it is the largest creditor of the U.S. and has more than three trillion U.S. dollars foreign exchange reserves. Walter predicts that - in view of the weak and unstable US financial strength - China will reset its wealth globally for strategic acquisition of companies, real estate, commodities and natural resources. (Source: Handelsblatt)

It's the US's responsibility to protect the interest of its creditors. The U.S. government should take "decisive and credible steps" to avoid a debt crisis and ensure the safety of Chinese investments. We hope the US will learn from history.

Zhu Guangyao

Said : Zhu Guangyao, Vice-Minister of Finance, while calling on the US to stay solvent to ensure the safety of massive Chinese assets, as reported in the Communist party newspaper People's Daily of October 8, 2013. This was the first official comment to the US government shutdown from China. China is US's biggest creditor holding $1277.3 millions worth of Treasury Securities as of the end of July, according to the US Treasury data. Next is Japan owning 1135.4 millions of US debt. The U.S. government should take "decisive and credible steps" to avoid a debt crisis and ensure the safety of Chinese investments, Zhu said.

In a press conference, Zhu, who indicated that his government is in constant contact with U.S. policymakers, expressed his concern about the US government shutdown and the fiscal deadlock and said : "it's the US's responsibility" to protect the interest of its creditors. The US Treasury Department has already set Oct 17 as the deadline before which it will run out of cash. Unless Congress authorizes it to borrow more before Oct 17, the US faces insolvency for the first time in its history. US government bonds are regarded as the pillars of global financial markets and a default will send shock waves across the globe. "We hope the US will learn from history," Zhu added. 

US government bonds are considered risk free across the globe. A default would push up bond yields worldwide, make borrowing harder, freeze liquidity and eventually plunge the world economy into recession once again. However, China Daily has also quoted He Weiwen, co-director of the China-US/European Union Study Center at the China Association of International Trade, saying that the possibility of a US default is slim. According to He, the debt ceiling issue and recent government shutdown are mainly a result of disputes between Democrats and Republicans, and such disputes have become more regular in recent years. But the two parties will eventually work out a conciliatory plan, he said. However, He Weiwen believes that a larger risk China should be wary of is the possible tapering off of the quantitative easing by the US Federal Reserve, which could lead to possible capital flight from emerging economies, even though the US has promised to consider the spillover effect on other countries when making such a move. Defending Zhu's remarks, he said : "It's right, though, for Vice-Minister Zhu to make such a stance to urge the US to protect China's interest."

Taro Aso

Reuters, in its news report today, has revealed that "Japan's finance minister, Taro Aso, also pressed the United States to quickly resolve its political deadlock over government finances to avoid a fiscal crisis that could damage the global economy." The news report has quoted Taro Aso telling reporters after a cabinet meeting that "The U.S. must avoid a situation where it cannot pay (for its debt) and its triple-A ranking plunges all of a sudden. The U.S. must be fully aware that if that happens the U.S. would fall into fiscal crisis.

As per the official data, U.S. liabilities to foreigners reported by U.S. banks were recorded at $4.8 trillion in June 2013, an increase of $240 billion from year-end 2012. U.S. banking liabilities include foreign holdings of U.S. short-term securities but exclude foreign holdings of U.S. long-term securities.

Besides China and Japan, other major holders of US Treasury Securities are : Brazil  ($256.4 billions); Taiwan ($185.8 billions); Switzerland ($178.2 billions); Belgium ($167.7 billions); United Kingdom ($156.9 billions); Luxembourg ($146.8 billions); Russia ($131.6 billions); Hong Kong ($120.0 billions); Ireland ($117.9 billions), and others.

Approximately 5% of practicing physicians in Canada engage in recurrent disruptive behaviour - inappropriate words, abusive language, shaming, outbursts of anger or threats of physical force, refusing to work cooperatively with others or being chronically late for scheduled patient appointments or meetings; or paying more attention to email than to discussions during work-related meetings.

Said : the Canadian Medical Protective Association (CMPA) located at Ottawa - Canada's capital and the fourth largest city in the country - in its discussion paper titled "The role of physician leaders in addressing physician disruptive behavior in healthcare institutions," released during its 2013 annual meeting held on August 21 this year. The paper addresses the issue of disruptive behavior and recognizes the negative impact of this behavior on providers and on patient safety. The Association has more than 86,000 members. (download full paper in pdf here) According to the discussion paper, although all health professionals, including administrators, can demonstrate disruptive behavior it may be particularly noticeable among doctors due to their role in the provision of care. Studies show approximately 5% of practicing physicians engage in recurrent disruptive behavior  These physicians are at risk of medico-legal consequences including human rights complaints and hospital investigations which can lead to suspension of hospital privileges. As well, investigations by Colleges can lead to suspension, restriction, or revocation of medical licensure, and termination of a medical career.

The paper notes that nearly 73% of respondents to the Canadian Association of Internes and Residents 2012 National Resident Survey reported experiencing inappropriate behavior by others that made them feel diminished during their residency. Half of all respondents (50.5%) experienced this behavior from other staff physicians or nursing staff. The most commonly cited behavior was yelling, shaming, and condescension (the attitude or behavior of people who believe they are more intelligent or better than other people). All physicians can experience or witness disruptive behaviour at some point in their careers.

Dr. John Gray

According to Dr. John Gray, CEO of the CMPA, there is interest in the healthcare community to address the issue of disruptive behavior  While this is in part due to regulatory and legislative changes, the growing sentiment in the healthcare community is that disruptive actions by doctors and other providers have never been acceptable, and collectively, the community needs to eliminate this conduct. “Disruptive behavior is a complex issue,” added Dr. Gray.  “It involves identifying the behavior and assessing whether any underlying factors exist that may be contributing to these actions, such as excessive workload, stresses in the work environment or individual physician health issues. While physician leaders play an essential role in this process, disruptive behavior requires a collaborative and tiered response.” “Every effort should be made to address disruptive behavior  when it happens,” said Dr. Gray. “Early identification and proactive intervention combined with a thorough workplace assessment and remediation when necessary, can yield positive results. Given the challenges with Canada’s physician supply, every effort should be made to retain high performing physicians.” 

The CMPA concludes that continued collaboration and dialogue at the national, provincial, territorial and local level are necessary to help mitigate and eliminate disruptive behaviour in the healthcare environment. The CMPA will continue to work with physician leaders, institutions and stakeholders to advance this important discussion. (Source : CMPA)

Start-ups are moving so fast that even paralysis in Washington won't get in their way.

Alan Patricof

Said : Alan Patricof, founder and managing director of Greycroft Partners as reported in Lydia DePillis's post in today's Washingtonpost. Alan is a longtime innovator and advocate for venture capital with more than 40 years of experience in this field.

Lydia, in her post, discusses "Why Silicon Valley has been silent on the shutdown" in spite of the fact that "Lobby shops for companies like Google and Facebook have ballooned, campaign contributions have started to flow, new organizations have formed, and high-profile advocacy campaigns have made headlines across the country."

Vivek Wadhwa writes in Washington Post that most of "Silicon Valley’s inhabitants aren't experiencing the misery that furloughed government employees are. But the Valley seems totally oblivious to what is happening in the nation’s capital." He noticed that the Valley’s “don’t care” attitude about government is strikingly visible.

The Valley’s "what, me worry?" attitude largely emanates from the fact that companies in the tech world are mostly funded by venture capitalists and angel investors and not by banks. Banks are much more cautious and their lending behaviors change with the prevailing macroeconomic conditions whereas VCs and angel investors enjoy much more freedom with their cash and are generally more liberal and willing to fund exciting new tech companies.

Vivek Wadhwa

Lydia DePilli

Wadhwa's observation that the Valley seems to have shrugged off the shutdown crisis entirely is, therefore, in sync with the Valley's ground realities. Alan's comment - in Lydia's post - quite appropriately describes this reality. "Frankly the start-up wave that's going on in this country is inexorable; nothing seems to be able to stop it. And most of our companies are at such an early high growth stage, they're growing 30, 40, 50 percent a year, so they're relatively isolated (from the D.C. impasse)."

Joe Green

However, there are people who feel that there is a need to create a voice for the knowledge community as America is already a major player and enjoys leadership position in the knowledge-based industry. They want this for the future and not for the short-term selfish motives. They are quite sure that an organized knowledge community in America can have a very powerful voice that can significantly influence politics, and hence, policy making. 

Facebook-affiliated FWD.us' director Joe Green - Mark Zuckerberg's Harvard roommate - is one such person, according to Lydia who feels that this (shutdown) is one of those times when such a voice could have an impact. FWD.us is an advocacy organization created to promote policies that will lead to a more advanced workforce and stronger knowledge economy in the U.S. The organization is backed by a diverse group of leading innovators, job creators, business owners and founders from Silicon Valley’s tech sector.

The notion that China will "rule the world,' is profoundly overstated and incorrect. China has a very long way to go before it becomes — if it ever becomes — a true global power. And it will never "rule the world." China remains a lonely power, lacking close friends and possessing no allies.

Prof. David Shambaugh

Said David Shambaugh, Professor of Political Science and International Affairs and Director, China Policy Program, in his book "China Goes Global: The Partial Power," published by Oxford University Press on April 29, 2013.

Concerned by the academic profession's tendency to "know more and more about less and less" and its increasing inability to generalize about China's development in all aspects, Prof. Shambaugh undertook the project of writing this book in 2007. As a scholar he felt it his obligation to explain the rise of China which is the big story of the present era. His book is intended to provide better understanding of the "forest" unlike most of the available China studies that give more information about the "trees."

Prof.  Shambaugh says that  the straightforward answer to big questions and speculations arising from China's rise lies in his book's subtitle: China is The Partial Power. His study reveals that the elements of China's global power are actually surprisingly weak and very uneven. He goes on to say that "China is not as important, and it is certainly not as influential, as conventional wisdom holds." Not impressed by China's rise, Prof. Shambaugh, claims that his book is not so much about China's rise as its spread. Most other 'China rise" books are usually based on economic and military studies and comparisons and focus on the conflict between the principal established power (the United States) and the challenging rising power (China).

He has dismissed the "China threat' as a hype. He also disagrees with observers who have already assumed that China will "rule the world.' His view is that such a scenario is not only very much overstated but totally incorrect. According to him China has a very long way to go before it becomes — if it ever becomes — a true global power. And it will never "rule the world." His book reveals that China does have an increasingly broad "footprint" across the globe but lacks the required depth. China's presence varies substantially by sector and region and the nation's strengths are not as strong as they seem on face value. He describes China's appeal, as a "model" for other nations to emulate, as 'weak to nonexistent.'

Prof. Shambaugh calls China a 'lonely power' without close friends and allies. China's closest state-to-state relationship with Russia, Pakistan, and North Korea, which appears harmonious, is fraught with hidden lack of trust. China, in spite of being a member of most international organizations, is not very active. It often stands aside or remains passive when issues concerning international security and global governance have to be dealt with. In such situations, China often makes known what it is against, but rarely what it is for. China never tries to resolve any global problem proactively and positively. Instead, it tries to influence events through nonaction or negative action and passive diplomacy as clear in its stand on issues related with North Korea, Iran, Syria, climate change etc. Prof. Shambaugh highlights China's role in perpetuating global problems by exercising vetoes in the UN Security Council or in supporting dictatorial regimes against Western will by teaming up with Russia and others what might be called as "coalitions of the unwilling."

The findings of Prof. Shambaugh demonstrate that China lacks real global power. Prof. Shambaugh is willing to accept China a global actor without (yet) being a true global power. Prof. Shambaugh follows Harvard Professor Joseph Nye's definition of power - Power is the ability of A to make B do what it would otherwise not do. Merely, resources do not constitute power unless they are used to try to influence the outcome of a situation. The essence of power lies in the conversion of resources into influence, which is the exercise of power. Prof. Shambaugh's study shows that China does not have any real influence on global events except in a very few limited areas of trade and commerce. China is quite active in various parts across the globe but its activities are mainly restricted to trade and commerce including, however, several sensitive sectors like energy, telecommunication, mining and infrastructure. But Prof. Shambaugh's findings indicate that China is not yet influencing or shaping actors or events.

China's global image remains mixed and the majority of the world is very ambivalent about China's rise. This is clear from two major studies carried out annually - one by the Pew (Pew Research Center) and another by BBC (BBC Poll : Attitude towards countries). The two studies when combined provide a clear view of China's global image. In his study, Prof. Shambaugh has quoted a prominent International Relations scholar saying: "There is a combination of insecurity and arrogance in China's behavior at present — insecure at home and arrogant abroad. The government is insecure about a lot of things, so there is an increase in domestic controls. Externally, there is a kind of overconfidence of China's position in the world and a strong reluctance to get involved in foreign entanglements." This perhaps explains China's present dilemma.

Professor Shambaugh is an internationally recognized authority and author on contemporary China and the international relations of Asia, with a strong interest in the European Union and transatlantic issues. He is a frequent commentator in international media, and has contributed to leading scholarly journals such as International Security, Foreign Affairs, The China Quarterly, and The China Journal. (Watch Prof. Shambaugh speaking on "China Goes Global: The Partial Power") 

Due to China’s rising economic power, many think it will eventually supersede and replace the US as the world’s dominant superpower. But overall, the U.S. enjoys a stronger global image than China

Said, Washington, DC based, Pew Research Center in its "2013 Spring Pew Global Attitudes Survey" report of July 18, 2013. 

The survey, carried out from March 2 to May 1, 2013, covered 37,653 respondents from 39 countries of six regions – North America, Europe, Middle East, Asia/Pacific, Latin America and Africa. The full report is available here.

Some of the major findings of the survey are :

• Just 37% of Americans express a positive view of China, down from 51% two years ago. Similarly, ratings for the U.S. have plummeted in China – in a 2010 poll conducted a few months after a visit to China by President Obama, 58% had a favorable impression of the U.S., compared with 40% today. However, young people in both countries express more positive attitudes about the other, a finding that is part of a broader pattern – in many countries, both the U.S. and China receive more favorable marks from people under age 30.
• Anti-Americanism was common throughout much of Europe during the presidency of George W. Bush but President Barack Obama has been enjoying consistently growing popularity among Europeans since 2009 which has given a big boost to America’s image in the region.
• Among the eight EU nations polled, China's ratings have declined significantly over the last two years in Britain, France, Poland and Spain. Greece was the only country in which a majority expressed a favorable view of China.
• America’s image was found to be the most negative in parts of the Muslim world, especially Pakistan (11% favorable), Jordan (14%), Egypt (16%), and the Palestinian territories (16%). Only 21% of Turks see the U.S. positively. America, however, received largely positive ratings in predominantly Muslim nations such as Senegal in West Africa and Indonesia and Malaysia in Southeast Asia.
• In the Asia/Pacific region - Philippines, South Korea and Japan - the U.S. received particularly favorable ratings. A majority in these countries said it was more important to have strong ties with the U.S. than with China. The worst ratings for China came from the Japanese – only 5% expressed a positive view. 82% of Japanese described territorial disputes - which have increased tensions between these two historic rivals over the past few years - as a big or very big problem.

Pew Research Center is a nonpartisan fact tank that informs the public about the issues, attitudes and trends shaping America and the world. It conducts public opinion polling, demographic research, media content analysis and other empirical social science research. Pew Research does not take policy positions. It is a subsidiary of The Pew Charitable Trusts.