Victor Davis Hanson
After the September financial meltdown, many abroad, and some at home, immediately — and with undisguised glee — blamed America’s problems on cowboy excess and forecast the end of American global influence.
But while those opportunistic critics had a point that reckless Americans had taken on far more debt than they should, the growing global economic downturn may well hurt others far more than the United States.
We got into this mess not because the American political system was flawed or because its free-market system was stagnant. The problem was that after some six years of uninterrupted growth, human greed drove us to demand even more than we had earned.
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Republicans let fast-talking Wall Street gurus gamble their firms into oblivion. Democrats allowed politically correct Fannie Mae and Freddie Mac bureaucrats to siphon off bonuses while guaranteeing loans to millions who had no business taking out a mortgage.
We, the people, ran up credit cards, borrowed for overpriced houses, and drove gas-guzzling cars fueled by high-priced imported fuel. The result was a national-debt flu — but not a depression cancer — that sickened an otherwise healthy host.
Why then would America in recession still be in better shape than others?
First, oil prices are crashing. That will soon save us hundreds of billions in imported-fuel expenses, while denying our overextended enemies — in Russia, as well as in Iran, Venezuela, and others in the OPEC cartel — half of their accustomed cash to cause trouble.
Meanwhile, the U.S. is increasing natural-gas production; is likely to increase drilling offshore; will all but certainly soon build more nuclear-power, wind, and solar plants; and is sitting on the world’s largest coal reserves. A new generation of hybrid, electric, and flex-fuel cars are on the horizon that could even shave off more from our imported-fuel bills.
Second, we are already way ahead of the rest of the world in dealing with toxic debt. Western Europe is discovering that its banks lent more against their reserves than did their American counterparts. European real estate was often more inflated than our own. Bankers in Frankfurt, London, and Paris are looking at trillions of dollars in uncollectible Euro loans throughout Latin America, Asia, and Eastern Europe. Most of our toxic debt was at least owed as mortgages by fellow Americans; far more of Europe’s is owed by those outside the European Union.
Even when the United States is reeling from financial panic, foreign investment continues to flow into America; the dollar, meanwhile, is climbing against the Euro. China’s export-driven and Russia’s energy economies are in crisis. They may have hundreds of billions in dollar reserves, but as the world energy and consumer economies slow, both countries lack our institutions, infrastructure, and broad flexibility to easily rebound.
Third, the United States is still growing as the population of Europe shrinks. The populations of Japan and China both age at a faster rate than America’s does. Russia faces the perfect storm of a declining, aging, and increasingly unhealthy population. The result is that America can much more easily grow itself out of a housing glut.
Fourth, the war in Iraq is no longer even a war in a traditional sense. In July, four times as many Americans were murdered in the city of Chicago in peacetime than were killed in Iraq at war in the same period. The cost of deploying American troops in Iraq is nearing the expense to station them elsewhere abroad. As Iraqis continue to take over additional provinces, the American presence will shrink further.
