Is China the New America?
By Harold James
The Great Depression made the United States the world’s unquestioned financial leader. The current crisis can do the same for China.
In the Great Depression, as in the current economic crisis, the downturn was particularly severe because of a lack of leadership in the international order. The dominant financial power of the 19th century, Britain, was financially exhausted by the First World War. The new major creditor, the United States, had emerged as a strong economic player, but did not yet have leadership committed to the maintenance of an open international economic order. The simple diagnosis was that Britain was unable to lead, and the United States unwilling.
If the scenario sounds familiar, it should. The story from the Great Depression has an uncanny echo in current debates about international economic leadership, with the United States playing the role of Britain — the exhausted debtor economy — and China taking the place of the United States as the world’s largest creditor. But if China is the America of this century, can it do a better job than the United States did in the 1930s? The way in which the emerging superpower takes to this role will determine in large part how the world will emerge from the downturn and the shape of the new global economic order that will follow.
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