It is rapidly acquiring many of the hallmarks of a “Third World” system. For starters, its macro-economic numbers are out of line, since it has a fiscal deficit of 8.5 per cent of GDP, and has run a trade deficit for many years, reaching about 5 per cent of GDP. The economy keeps chugging along on the back of massive international borrowing, on a scale that is generally recognised as unsustainable. As a consequence, it has an abysmal savings-GDP ratio.
It has a bankrupt financial system that can only be saved through large-scale nationalisation of banks; the alternative is that the bulk of the banking system will be de facto government-controlled. Critical parts of its industry (and also agriculture) are uncompetitive, and survive only because of government subsidies. Sitting on top of this superstructure is a plutocracy that has been busy squirreling away money for itself, despite public outrage, while the large mass of people struggle to make ends meet and are mired in debt. Yet its politicians are such that when they come up with policy responses, they shovel more money towards the plutocrats. As for its business environment, it regularly spews out one scandal after another.
As a society, it has witnessed growing inequality, in both income and wealth, and there is a substantial under-class. A significant minority cannot afford health care, and the public school system is generally recognised as being below par. There is no social security worth the name. The country has a hopeless environmental record, and crime is such that it has the world’s biggest prison population, in relation to the size of the population.
Civil rights have been eroded in recent times. People are held without trial for years on end, without being informed of the charges against them, and torture is officially sanctioned. For good measure, the country tends to get embroiled in prolonged and needless wars, with countries that pose no threat to it.
As you should have guessed, we are talking of the United States of America. The only reason why no one thinks of it as being a part of the “Third World” is the obvious one, that it is a very rich country. More careful analysis makes it clear that the operative difference is not wealth but something else altogether. Unlike all other “Third World” economies, this one has a currency that the rest of the world is willing to accept as a medium of exchange, and as a store of value. So the government can keep printing currency notes to pay for its financial shortfalls. Take away that printing press, and the entire system becomes unsustainable.
This is not a complete picture of course, and therefore a grossly unfair one. For all its shortcomings, the US has a vibrant corporate world, world leadership in science and technology, outstanding universities, an energetic and hardworking people, strong institutions of governance, and a creative approach to problems that help the country work out solutions to the most difficult problems—qualities not found in a true “Third World” system. Also, some of the bleakness of the negative side of the balance sheet only reflects the current mess in the financial sector and economic recession.
Conceding that, the fact is that the US has to look at itself differently if it is going to address deep-seated problems. If it thinks of itself as the world’s only superpower, it will not do the things that “Third World” economies are routinely asked to do by the IMF: devalue the currency in order to balance trade, cut government spending, increase savings, and bite the bullet in order to bear the pain. Run this check-list for the Obama economic package, and some things start becoming clear.
