Obituary: John Updike

Obituary: John Updike

John Updike's novels, magisterial dissections of the soul of post-World War II middle America, placed him at the very pinnacle of his profession.

Works such as Couples and the Rabbit series chronicled the obsessions, passions and anxieties of three generations.

Whether writing novels, short stories, essays or poems, John Updike's work always seemed to find the pulse of modern America.

Often controversial, he remained at the cutting edge of literature into his 70s and, with his most celebrated character, Harold "Rabbit" Angstrom, he found an authentic 20th-Century everyman.

The son of a schoolmaster, John Updike was born in Pennsylvania in March 1932 and, after attending Harvard, spent a year in the UK, as a student at the Ruskin School of Drawing and Fine Art at Oxford.

Later he joined the staff of the New Yorker magazine, to which he contributed numerous poems, essays and short stories.

Updike's first novel, The Poorhouse Fair, was published in 1959, to mixed, but generally favourable, reviews.

The following year, though, saw the publication of the book which established him as one of the greatest novelists of his age.

Rabbit, Run marked the debut of his most enduring, if not endearing, character, Harold "Rabbit" Angstrom.

In this and its sequels, Rabbit Redux, Rabbit is Rich and Rabbit at Rest - published at ten-yearly intervals - Updike charts the course of one man's life: his job, marriage, affairs, minor triumphs and death.

The Rabbit novels, though, are as much about the changing soul of the United States as about any individual character.

Even so, with all his petty failings and unrequited hopes, their main character presents not a mere cipher but a rounded, fully realised, portrait of a human being.

Updike was clear about the focus of his work: "My subject is the American Protestant small town middle class."

"I like middles. It is in middles that extremes clash, where ambiguity restlessly rules."

During the mid-60s, works such as The Centaur and Of the Farm brought Updike critical acclaim but Couples, published in 1968, gave him his first popular success.

Couples, has been called "the best-written dirty book since the Decameron" - but this does less than justice to either Updike or Boccaccio.

The theme of the book is indeed adultery, as practised by ten middle-class couples in a small New England town

Though the author does not hesitate to give detailed descriptions of sexual intercourse, he does so with a lucidity and reverence that is completely removed from pornography.

Altogether, John Updike published more than 50 novels: one of his novels about Harold Angstrom, Rabbit is Rich, won the 1982 Pulitzer Prize for fiction, while Rabbit at Rest won in 1993.

Though often berated by critics for his seeming obsession with golf and sex, it is his mastery of the English language, its nuances, vagueries and sheer beauty, which brought John Updike millions of admirers.

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/americas/3526947.stm

Published: 2009/01/27 18:42:17 GMT

© BBC MMIX

“Be Nice to the Countries That Lend You Money”: The USA and China

In his first interview since the world financial crisis, Gao Xiqing, the man who oversees $200 billion of China’s $2 trillion in dollar holdings, explains why he’s betting against the dollar, praises American pragmatism, and wonders about enormous Wall Street paychecks. And he has a friendly piece of advice:

by James Fallows
“Be Nice to the Countries That Lend You Money”

Americans know that China has financed much of their nation’s public and private debt. During the presidential campaign, Barack Obama and John McCain generally agreed on the peril of borrowing so heavily from this one foreign source. For instance, in their final debate, McCain warned about the “$10 trillion debt we’re giving to our kids, a half a trillion dollars we owe China,” and Obama said, “Nothing is more important than us no longer borrowing $700billion or more from China and sending it to Saudi Arabia.” Their numbers on the debt differed, and both were way low. One year ago, when I wrote about China’s U.S. dollar holdings, the article was called “The $1.4 trillion Question.” When Barack Obama takes office, the figure will be well over $2 trillion.

During the late stages of this year’s campaign, I had several chances to talk with the man who oversees many of China’s American holdings. He is Gao Xiqing, president of the China Investment Corporation, which manages “only” about $200billion of the country’s foreign assets but makes most of the high-visibility investments, like buying stakes in Blackstone and Morgan Stanley, as opposed to just holding Treasury notes.

Gao, whom I mentioned in my article, would fit no American’s preexisting idea of a Communist Chinese official. He speaks accented but fully colloquial and very high-speed English. He has a law degree from Duke, which he earned in the 1980s after working as a lawyer and professor in China, and he was an associate in Richard Nixon’s former Wall Street law firm. His office, in one of the more tasteful new glass-walled high-rises in Beijing, itself seems less Chinese than internationally “fusion”-minded in its aesthetic and furnishings. Bonsai trees in large pots, elegant Japanese-looking arrangements of individual smooth stones on display shelves, Chinese and Western financial textbooks behind the desk, with a photo of Martin Luther King Jr. perched among the books. Two very large, very thin desktop monitors read out financial data from around the world. As we spoke, Western classical music played softly from a good sound system.

Gao dressed and acted like a Silicon Valley moneyman rather than one from Wall Street—open-necked tattersall shirt, muted plaid jacket, dark slacks, scuffed walking shoes. Rimless glasses. His father was a Red Army officer who was on the Long March with Mao. As a teenager during the Cultural Revolution, Gao worked on a railroad-building gang and in an ammunition factory. He is 55, fit-looking, with crew-cut hair and a jokey demeanor rather than an air of sternness.

His comments below are from our one on-the-record discussion, two weeks before the U.S. elections. As I transcribed his words, I realized that many will look more astringent on the page than they sounded when coming from him. In person, he seemed to be relying on shared experience in the United States—that is, his and mine—to entitle him to criticize the country the way its own people might. The conversation was entirely in English. Because Gao’s answers tended to be long, I am not presenting them in straight Q&A form but instead grouping his comments about his main recurring themes.

Does America wonder who its new Chinese banking overlords might be? This is what one of the very most influential of them had to say about the world financial crisis, what is wrong with Wall Street, whether one still-poor country with tremendous internal needs could continue subsidizing a still-rich one, and how he thought America could adjust to its “realistic” place in the world. My point for the moment is to convey what it is like to hear from such a man, rather than to expand upon, challenge, or agree with his stated views.

.....

About the financial crisis of 2008, which eliminated hundreds of billions of dollars’ worth of savings that the Chinese government had extracted from its people, through deliberately suppressed consumption levels:

We are not quite at the bottom yet. Because we don’t really know what’s going to happen next. Everyone is saying, “Oh, look, the dollar is getting stronger!” [As it was when we spoke.] I say, that’s really temporary. It’s simply because a lot of people need to cash in, they need U.S. dollars in order to pay back their creditors. But after a short while, the dollar may be going down again. I’d like to bet on that!

The overall financial situation in the U.S. is changing, and that’s what we don’t know about. It’s going to be changed fundamentally in many ways.

Think about the way we’ve been living the past 30 years. Thirty years ago, the leverage of the investment banks was like 4-to-1, 5-to-1. Today, it’s 30-to-1. This is not just a change of numbers. This is a change of fundamental thinking.

People, especially Americans, started believing that they can live on other people’s money. And more and more so. First other people’s money in your own country. And then the savings rate comes down, and you start living on other people’s money from outside. At first it was the Japanese. Now the Chinese and the Middle Easterners.

We—the Chinese, the Middle Easterners, the Japanese—we can see this too. Okay, we’d love to support you guys—if it’s sustainable. But if it’s not, why should we be doing this? After we are gone, you cannot just go to the moon to get more money. So, forget it. Let’s change the way of living. [By which he meant: less debt, lower rewards for financial wizardry, more attention to the “real economy,” etc.]

.....

About stock market derivatives and their role as source of evil:

If you look at every one of these [derivative] products, they make sense. But in aggregate, they are bullshit. They are crap. They serve to cheat people.

I was predicting this many years ago. In 1999 or 2000, I gave a talk to the State Council [China’s main ruling body], with Premier Zhu Rongji. They wanted me to explain about capital markets and how they worked. These were all ministers and mostly not from a financial background. So I wondered, How do I explain derivatives?, and I used the model of mirrors.

First of all, you have this book to sell. [He picks up a leather-bound book.] This is worth something, because of all the labor and so on you put in it. But then someone says, “I don’t have to sell the book itself! I have a mirror, and I can sell the mirror image of the book!” Okay. That’s a stock certificate. And then someone else says, “I have another mirror—I can sell a mirror image of that mirror.” Derivatives. That’s fine too, for a while. Then you have 10,000 mirrors, and the image is almost perfect. People start to believe that these mirrors are almost the real thing. But at some point, the image is interrupted. And all the rest will go.

When I told the State Council about the mirrors, they all started laughing. “How can you sell a mirror image! Won’t there be distortion?” But this is what happened with the American economy, and it will be a long and painful process to come down.

I think we should do an overhaul and say, “Let’s get rid of 90 percent of the derivatives.” Of course, that’s going to be very unpopular, because many people will lose jobs.

.....

About Wall Street jobs, wealth, and the cultural distortion of America:

I have to say it: you have to do something about pay in the financial system. People in this field have way too much money. And this is not right.

When I graduated from Duke [in 1986], as a first-year lawyer, I got $60,000. I thought it was astronomical! I was making somewhere a bit more than $80,000 when I came back to China in 1988. And that first month’s salary I got in China, on a little slip of paper, was 59 yuan. A few dollars! With a few yuan deducted for my rent and my water bill. I laughed when I saw it: 59 yuan!

The thing is, we are working as hard as, if not harder than, those people. And we’re not stupid. Today those people fresh out of law school would get $130,000, or $150,000. It doesn’t sound right.

Individually, everyone needs to be compensated. But collectively, this directs the resources of the country. It distorts the talents of the country. The best and brightest minds go to lawyering, go to M.B.A.s. And that affects our country, too! Many of the brightest youngsters come to me and say, “Okay, I want to go to the U.S. and get into business school, or law school.” I say, “Why? Why not science and engineering?” They say, “Look at some of my primary-school classmates. Their IQ is half of mine, but they’re in finance and now they’re making all this money.” So you have all these clever people going into financial engineering, where they come up with all these complicated products to sell to people.

.....

About the $700 billion U.S. financial-rescue plan enacted in October:

Finally, after months and months of struggling with your own ideology, with your own pride, your self-right-eousness … finally [the U.S. applied] one of the great gifts of Americans, which is that you’re pragmatic. Now our people are joking that we look at the U.S. and see “socialism with American characteristics.” [The Chinese term for its mainly capitalist market-opening of the last 30 years is “socialism with Chinese characteristics.”]

It is joking, and many people are saying: “No, Americans still believe in free capitalism and they think this is just a hiccup.” This is like our great leader Deng Xiaoping, who said that it doesn’t matter if the cat is white or black, as long as it catches the mouse. It doesn’t matter what we call this. It’s pragmatic.

.....

With so much of China’s money at stake, did U.S. officials consult the Chinese about the rescue plan?

Not directly. We were talking to people there, and they were hoping that we would be supportive by not pulling out our money. We know that by pulling out money, we’re not serving anyone’s good. Including ourselves. [This is the famous modern “balance of financial terror.” If Chinese officials started pulling assets out of the U.S. and touched off a run on the dollar, their vast remaining dollar holdings would plummet in value.] So we’re trying to help, at least by not aggravating the problem.

But I think at the end of the day, the American government needs to talk with people and say: “Why don’t we get together and think about this? If China has $2 trillion, Japan has almost $2 trillion, and Russia has some, and all the others, then—let’s throw away the ideological differences and think about what’s good for everyone.” We can get all the relevant people together and think up what people are calling a second Bretton Woods system, like the first Bretton Woods convention did.

.....

On what might make the Chinese government start taking its dollars out of America (I began the question by saying that China would hurt itself by pulling out dollar assets—at which he interjected, “in the short term”—and then asked about the long-term view):

Today when we look at all the markets, the U.S. still is probably the most viable, the most predictable. I was trained as a lawyer, and predictability is always very important for me.

We have a PR department, which collects all the comments about us, from Chinese newspapers and the Web. Every night, I try to pick a time when I’m in a relatively good mood to read it, because most of the comments are very critical of us. Recently we increased our holdings in Blackstone a little bit. Now we’re increasing a little bit our holdings in Morgan Stanley, so as not to be diluted by the Japanese. People here hate it. They come out and say, “Why the hell are you trying to save those people? You are the representative of the poor people eating porridge, and you’re saving people eating shark fins!” It’s always that sort of thing.

.....

And how should Americans feel about the growing Chinese presence in their economy? Isn’t it natural for them to worry that China will keep increasing its stake in American debt and assets—or that China won’t, essentially cutting America off?

I can understand why Americans might feel that way. But, talking with my lawyer head once again, it’s not relevant to discuss how Americans “should” think. We should discuss how Americans might think.

This concern is not really about China itself. It could be any country. It could be Japan, or Germany. This generation of Americans is so used to your supremacy. Your being treated nicely by everyone. It hurts to think, Okay, now we have to be on equal footing to other people. “On equal footing” would necessarily mean that sometimes you have to stoop to appear to be humble to other people.

And you can’t think as a soldier. You put yourself at the enemy end of everyone. I grew up during the Cultural Revolution, when people really treated other people like enemies. I grew up in an environment where our friends, our relatives, people I called Uncle or Auntie, could turn around and put a nasty face to me as a small child. One time, Vladimir Lenin told Gorky, after reading Gorky’s autobiography, “Oh my god! You could have become a very nasty person!” Those are exactly the words one of my dear professors told me after hearing what I went through.

But over the years, I believe I learned to be humble. To treat other people nicely. I learned that, from a social point of view, no matter how lowly statured a person you are talking to, as a person, they are the same human being as you are. You have to respect them. You have to apologize if you inadvertently hurt them. And often you have to go out of your way to be nice to them, because they will not like you simply because of the difference in social structure.

Americans are not sensitive in that regard. I mean, as a whole. The simple truth today is that your economy is built on the global economy. And it’s built on the support, the gratuitous support, of a lot of countries. So why don’t you come over and … I won’t say kowtow [with a laugh], but at least, be nice to the countries that lend you money.

Talk to the Chinese! Talk to the Middle Easterners! And pull your troops back! Take the troops back, demobilize many of the troops, so that you can save some money rather than spending $2 billion every day on them. And then tell your people that you need to save, and come out with a long-term, sustainable financial policy.

.....

Although Gao has frequently mentioned Chairman Mao’s maxim—“Go with the Republicans. They’re predictable!”—he obviously was hoping for a “change” agenda under the Democrats:

The current conditions can’t go on. It is time for the new government, under Obama or even McCain, to really tell people: “Look, this is wartime, this is about the survival of our nation. It’s not about our supremacy in the world. Let’s not even talk about that any more. Let’s get down to the very basics of our livelihood.”

I have great admiration of American people. Creative, hard-working, trusting, and freedom-loving. But you have to have someone to tell you the truth. And then, start realizing it. And if you do it, just like what you did in the Second World War, then you’ll be great again!

If that happens, then of course—American power would still be there for at least as long as I am living. But many people are betting on the other side.

All material copyright The Atlantic Monthly Group. All rights reserved.

Community by Jedediah Purdy

Community
Jedediah Purdy


Alexis de Tocqueville famously believed that the young American republic had a genius for community. "Voluntary associations," he wrote, sprang up everywhere to solve practical problems, agitate for political change, or try to move other Americans by moral suasion. These supple and pragmatic groupings trained people to take charge of their own affairs and put them in the habit of accommodating those who disagreed with them. They fostered the blend of initiative, self-assertion, and mutual respect that makes civic life work.

But Tocqueville also saw a bleaker face of American community. In a society of restless self-seekers, always eager to do a little better and fearful of falling behind, he worried that the moral imagination would contract. Americans, he wrote, fixed their attention on their own affairs and the affairs of those closest to them. They became indifferent to the larger community. These self-made people "owe no man anything and hardly expect anything from anybody. They form the habit of thinking of themselves in isolation and imagine that their whole destiny is in their own hands."

Tocqueville’s paradox has only become more apt over the last eight years. Americans have both asked communities to do more and withdrawn into themselves, making the country more communitarian and more libertarian all at once. Some of this change is rooted in the politics of the Bush Administration, which has leaned on the language and symbolism of community but asked little in the way of civic engagement. Some of it, though, reflects much deeper changes, beyond anything Tocqueville foresaw or presidents can control. Americans have embraced stronger forms of individuality and self-realization, and they have begun seeking out communities that help to fulfill these goals. The very nature of community in America has changed.

Let’s begin with today’s version of Tocqueville’s paradox. On the one hand, communities are being asked to step up and do work that, not so long ago, would have belonged to government. This is true in the bipartisan embrace of faith-based social services. It is true of lawmaking: Ever more Americans live in housing developments, where homeowners’ associations take the place of local government. Even in political rhetoric, the last two presidents have studded their major addresses with the language of community, service, character, and personal responsibility, emphasizing the role of families and religious institutions in American life and eschewing traditional talk of national purpose or greatness. (The glaring exception is George W. Bush’s dramatic portrayal of a global anti-terrorism campaign as a national mission, but that is sharply divergent from his approach to domestic politics.) The public’s trust in institutions maps these changes, as Americans put their faith in local and civic rather than national and political institutions. Polls find that religious organizations, small business, and the military (a volunteer organization) enjoy far and away the highest levels of public trust, while Congress and the presidency come in near the bottom.

At the same time, there is evidence that Americans are withdrawing, both into their own lives and into communities of the like-minded. For all the quibbles it produced, Robert Putnam’s conclusion in Bowling Alone stands: Recent decades have devastated traditional social networks that were often cross-class and quasi-civic. A 2006 study found that between 1985 and 2004, Americans reported the average number of people with whom they can "discuss important issues" falling from three to two, with a quarter saying they have no one with whom to discuss such issues and 80 percent saying they turn only to family members. These networks are weakest among poorer and less-educated people. So is the share of those who say they more or less trust others.

As for like-mindedness, the most striking piece of evidence is journalist Bill Bishop’s (author of The Big Sort) discovery that between the very close presidential election of 1976 and that of 2004, the share of American counties with landslides (a spread of 20 points or more) rose from 27 percent to over 60 percent. Bishop speculates that this political segregation results from sorting along subtler cultural lines, as mobile Americans choose neighbors like themselves. In turn, party affiliation comes to be less about policy and more about cultural style and identity-reinforcing issues like abortion and guns. Other trends bespeak the same pattern. The local and voluntary organizations that Americans tend to trust (religious groups, small business, public schools in certain communities) are those they share with people like themselves, while the political and impersonal ones they mistrust lump them together with strangers. The emergence of civic brokers in politics, like megapreacher Rick Warren, marks an effort to bypass traditional sources of information in favor of judgments filtered by the like-minded and culturally similar. No doubt some of these attitudes are long-standing. It is probably not accidental that the country Tocqueville described has a fair amount in common with today’s America. But the trends are intensifying, at least across recent decades.

There is fair reason to think, then, that the country continues to play out Tocqueville’s paradox. We are becoming more communitarian toward those who resemble us, substituting voluntary associations for politics in addressing social problems and drawing on like-minded communities rather than national sources in making political decisions. But we are also more likely to feel disconnected from the fates of those we consider different from us, and skeptical of institutions that tie us too strongly to them. And, as in the bleak end-point of Tocqueville’s description, we are more likely to be alone.

The shape of our politics may be in some ways a symptom of this situation. But it could also be a cause, as Bush’s presidency has exploited and amplified these insular trends. Karl Rove’s politics of divisive cultural symbolism and mistrust of culturally different "elites" seized on the underlying changes and made them more politically salient. The administration’s indifference to civic obligation even after September 11 produced no unifying counterpoint to balkanized culture.

The Obama-McCain contest was mixed on this front. The two candidates were, in their partisan fields, the ones most identified with the idea of a national civic identity that might bridge subcultures. Their victories bespoke an appetite for a unifying politics, suggesting that even if Americans do not trust or identify with the institutions that tie them together across party and cultural lines, they hunger for versions of those institutions that could sustain their loyalty. Yet the general election brought inter-community hostility and mistrust back to the fore–ironically, since one might expect the general, rather than partisan primaries, to be the place where unifying ideas get most traction. Instead, the red-meat culture-war rhetoric of the Republican National Convention and the electrically divided response to Sarah Palin revivified us-and-them cultural issues.

The switch from civic-minded primaries to a culturally divided general election raised the troubling possibility that, although Americans avidly wish for a more unifying national politics, they cannot coalesce around a political idea that would in fact unify them. Differences in attitudes, priorities, and styles may be so strong, and so habitually important in forming political judgments, that either party can produce its own vision of national community, but neither can persuade the other’s partisans to share it. That would be an especially tragic situation, in which the very situation that voters wish to change restricts their power to overcome it.

What will the changing shape of American community mean for the next president? Part of the answer depends on what Obama makes of it–whether he takes it as given, as the Bush Administration has mostly done, or he challenges it by tapping the appetite for a stronger sense of shared civic community.

There are reasons to take it as given. Cultural division could present a serious barrier to ambitious initiatives. A national health care program, for example, could falter on the perception that the wrong kinds of people–the other kinds of Americans–would benefit too much, or contribute too little, a kind of argument that is nearly always available absent a background feeling of solidarity. The same goes for a national-service program or a draft of the kind that another war might require. There are things that people simply will not do for others with whom they have only a weak feeling of common fate, and if paying taxes is one, dying may certainly be another. It might be smarter then to develop initiatives that don’t ask too much of civic spirit and instead draw on traditional ideas of self-reliance. Social Security got some of its political traction because it came dressed as a guaranteed savings account, not a solidaristic entitlement program. Linking new programs to personal effort is one approach, exemplified by income supports for the working poor and college loans or grants tied to academic performance. Another is to concentrate help on areas seen as beyond the control of the individual, such as catastrophic health insurance and early-childhood education.

But there is another strategy: to use governing as an opportunity to build an electoral majority and a policy program out of the president’s own image of national community. Nothing about today’s cultural division necessarily dooms a national-service program or universal health care, and either, if successful, might strengthen a feeling of common fate among citizens. So might taking on energy independence and research into renewable fuels as a national mission, along the lines of the Apollo program. If politics can contribute to balkanized community, it can also contribute to changing it. Creating experiences of shared effort, such as national service, can affect participants’ attitudes beyond those experiences and make them open to broader visions of national community.

There is, however, another way of looking at the whole question. Those inclined to take politics seriously might find it obvious that we should worry about homogenous communities and thin, fractious national identity. Maybe so, but it is also helpful to consider why American community has been developing as it has, and how the changes are connected with positive aspects of our national life.

The wish to be among people one feels comfortable with is hardly selfish and narcissistic (or, certainly, it is not only that). Rather, it is of a piece with a much larger development, and a good one. Americans since World War II have asked more of their private lives than ever before: not just survival and basic security, but self-improvement, self-expression, and a sense of a meaningful life. Civic culture flourished in the early twentieth century not least because there was not much else to do, and there was considerable need to get out of the house or tenement.

But Americans have recently sought to enrich the experience of staying in the house or the office. The ideal of marriage is increasingly of a highly personal and complex fit with one’s own personality, as it already is and as one wishes it to be. The same goes for the ideal of a career. On the consumer side, economic life increasingly includes a complex of self-improving and life-enriching techniques and technologies, from mood-altering drugs to psychotherapy, Lasik surgery to diet books. It is no surprise that Americans have asked similar things of their communities. Where once a sturdy house and neighbors who did not fight too loudly might have seemed enough, now people seek places to live where their values and identities make sense to others, and find reinforcement. What self-sorting Americans embrace in the new forms of community is more important to them than the traditional kinds of community they are leaving behind.

These changes in personal goals redound to larger ideas about freedom and the American polity, sometimes in positive ways. The Supreme Court’s ruling for a constitutional right to same-sex intimacy is in one respect a political expression of a much more widespread idea: that personal identity is important enough that people can demand respect for it. The same idea underlies the much broader trend toward openness and tolerance around sexual identity, almost indisputably the biggest piece of moral progress in the last ten years of American life (at least until the election of an African American president).

The emphasis on personal identity also contributes to a subtler but significant loosening of the terms of racial identity politics. The last generation of racial politics was obsessed with group authenticity, the question of who was "really" whatever the identity at issue was. The obsession extended from college campuses to the media to the 2002 Newark mayoral election, in which the black incumbent, Sharpe James, attacked the black challenger, Corey Booker, as, in effect, a white man and a Jew. (Booker lost, then won in 2006.) One of the reasons Barack Obama’s candidacy stirred so much excitement among younger voters is that both his biography and his language, particularly in his instant-classic Philadelphia speech on race, express a complex reality in which individuals combine diverse strands of experience, some inherited, others chosen. These changes have a downside for solidarity, of course: Witness the remarkable poll late last year that found barely half of black Americans consider themselves part of a unified race, because of the extent of African American diversity. But solidarity, too, has a downside. Mandatory identity is a psychological and political burden, and the power to opt out in favor of one’s own particular self is a gain in freedom, whatever else it is.

The meaning of community has changed in American life, not just since Tocqueville’s observations, but in the last few decades. As Americans have become more individualistic and placed more value on personal fulfillment, they have rejected forms of community that constrain those goals and looked for neighborhoods, groups, and friendships that reinforce them. The old idea of community–geographic, racial, and civic–was of non-optional membership. Today’s versions is all about options: We create ties with what moves us. That’s particularly convenient for people who already have a lot of choices and don’t need much support from the old, mandatory types of community–neighbors, family, or government acting on a strong idea of civic bonds. It’s harder for those who start with fewer advantages, or have bad luck, and need a hand at a time when no one is moved to extend one.

These changes are hardly the first: American community has been an ever-changing thing from the beginning. And Americans have always feared that community was breaking down around them. Members of the founding generation, including Thomas Jefferson and John Adams, ended their lives feeling like strangers in a democratic, money-chasing, evangelical society they did not recognize. The Southern form of community that locals spent the early twentieth century consolidating had to be forcibly disassembled by federal courts and, in some cases, federal troops. The Sixties convinced pessimistic observers that American civilization had become a contradiction in terms, overwhelmed by hedonism and narcissism. Out of every disruption, however, new forms of orderly social life have arisen, in which people have raised families, worshipped, and learned to live with their neighbors. At each stop on this bumpy historical ride, Americans have disembarked to congratulate one another on their Tocquevillean genius for community.

Historical perspective should not encourage either the blithe mistake of assuming that community will always take care of itself or the nihilistic mistake of concluding that "community" means nothing but what a given time makes of it. The word describes our ways of addressing basic human needs, from making neighborhoods safe to finding fulfillment and recognition in daily life. We cannot meet these needs entirely through government, the market, the nuclear family, or solitary reflection. Community is everything else: volunteer service, activism, friendship, shared worship, book groups, and sports. People choose versions of community that suit them–canvassing for Obama and playing ultimate Frisbee in Chapel Hill or teaching Sunday school and coaching midnight basketball outside Denver–but not in the same way they make up an iPod playlist. They enter community out of a sense of responsibility and a wish to be connected and make a difference beyond themselves. They may hope to find reinforcement in the experience, but often they also hope to change. Community is neither the opposite of politics nor its useful handmaiden. It is neither a stern, virtuous counterpoint to private life nor a self-regarding extension of it.

The American project would go into receivership if ordinary people lost the power to do certain things: solve problems for themselves, talk intelligently and sympathetically with others from different backgrounds, assuage one another’s loneliness and suffering, and connect all of this activity with the larger national life of politics. We are not likely to lose those powers now. But the ways we exercise them are changing, rapidly and sometimes momentously. Barack Obama will have to negotiate the new landscape of community, and he will have some chance to change it. But it will also remain its own thing, persisting and changing. That is part of its point.


copyright: Democracy; Issue #11, Winter 2009.

5 Disastrous Decisions That Got Us into This Economic Mess by Joseph Stiglitz

5 Disastrous Decisions That Got Us into This Economic Mess

By Joseph Stiglitz, Vanity Fair. Posted December 11, 2008.

We are at a dangerous moment. Behind the debates over future economic policy is a debate over history -- here are the major mistakes that got us here.


There will come a moment when the most urgent threats posed by the credit crisis have eased and the larger task before us will be to chart a direction for the economic steps ahead. This will be a dangerous moment. Behind the debates over future policy is a debate over history -- a debate over the causes of our current situation. The battle for the past will determine the battle for the present. So it's crucial to get the history straight.

What were the critical decisions that led to the crisis? Mistakes were made at every fork in the road -- we had what engineers call a "system failure," when not a single decision but a cascade of decisions produce a tragic result. Let's look at five key moments.

No. 1: Firing the Chairman

In 1987 the Reagan administration decided to remove Paul Volcker as chairman of the Federal Reserve Board and appoint Alan Greenspan in his place. Volcker had done what central bankers are supposed to do. On his watch, inflation had been brought down from more than 11 percent to under 4 percent. In the world of central banking, that should have earned him a grade of A+++ and assured his re-appointment. But Volcker also understood that financial markets need to be regulated. Reagan wanted someone who did not believe any such thing, and he found him in a devotee of the objectivist philosopher and free-market zealot Ayn Rand.

Greenspan played a double role. The Fed controls the money spigot, and in the early years of this decade, he turned it on full force. But the Fed is also a regulator. If you appoint an anti-regulator as your enforcer, you know what kind of enforcement you'll get. A flood of liquidity combined with the failed levees of regulation proved disastrous.

Greenspan presided over not one but two financial bubbles. After the high-tech bubble popped, in 2000-2001, he helped inflate the housing bubble. The first responsibility of a central bank should be to maintain the stability of the financial system. If banks lend on the basis of artificially high asset prices, the result can be a meltdown -- as we are seeing now, and as Greenspan should have known. He had many of the tools he needed to cope with the situation. To deal with the high-tech bubble, he could have increased margin requirements (the amount of cash people need to put down to buy stock). To deflate the housing bubble, he could have curbed predatory lending to low-income households and prohibited other insidious practices (the no-documentation -- or "liar" -- loans, the interest-only loans, and so on). This would have gone a long way toward protecting us. If he didn't have the tools, he could have gone to Congress and asked for them.

Of course, the current problems with our financial system are not solely the result of bad lending. The banks have made mega-bets with one another through complicated instruments such as derivatives, credit-default swaps, and so forth. With these, one party pays another if certain events happen -- for instance, if Bear Stearns goes bankrupt, or if the dollar soars. These instruments were originally created to help manage risk -- but they can also be used to gamble. Thus, if you felt confident that the dollar was going to fall, you could make a big bet accordingly, and if the dollar indeed fell, your profits would soar. The problem is that, with this complicated intertwining of bets of great magnitude, no one could be sure of the financial position of anyone else -- or even of one's own position. Not surprisingly, the credit markets froze.

Here too Greenspan played a role. When I was chairman of the Council of Economic Advisers, during the Clinton administration, I served on a committee of all the major federal financial regulators, a group that included Greenspan and Treasury Secretary Robert Rubin. Even then, it was clear that derivatives posed a danger. We didn't put it as memorably as Warren Buffett -- who saw derivatives as "financial weapons of mass destruction" -- but we took his point. And yet, for all the risk, the deregulators in charge of the financial system -- at the Fed, at the Securities and Exchange Commission, and elsewhere -- decided to do nothing, worried that any action might interfere with "innovation" in the financial system. But innovation, like "change," has no inherent value. It can be bad (the "liar" loans are a good example) as well as good.

No. 2: Tearing Down the Walls

The deregulation philosophy would pay unwelcome dividends for years to come. In November 1999, Congress repealed the Glass-Steagall Act -- the culmination of a $300 million lobbying effort by the banking and financial-services industries, and spearheaded in Congress by Senator Phil Gramm. Glass-Steagall had long separated commercial banks (which lend money) and investment banks (which organize the sale of bonds and equities); it had been enacted in the aftermath of the Great Depression and was meant to curb the excesses of that era, including grave conflicts of interest. For instance, without separation, if a company whose shares had been issued by an investment bank, with its strong endorsement, got into trouble, wouldn't its commercial arm, if it had one, feel pressure to lend it money, perhaps unwisely? An ensuing spiral of bad judgment is not hard to foresee. I had opposed repeal of Glass-Steagall. The proponents said, in effect, Trust us: we will create Chinese walls to make sure that the problems of the past do not recur. As an economist, I certainly possessed a healthy degree of trust, trust in the power of economic incentives to bend human behavior toward self-interest -- toward short-term self-interest, at any rate, rather than Tocqueville's "self interest rightly understood."

The most important consequence of the repeal of Glass-Steagall was indirect -- it lay in the way repeal changed an entire culture. Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people's money very conservatively. It is with this understanding that the government agrees to pick up the tab should they fail. Investment banks, on the other hand, have traditionally managed rich people's money -- people who can take bigger risks in order to get bigger returns. When repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top. There was a demand for the kind of high returns that could be obtained only through high leverage and big risktaking.

There were other important steps down the deregulatory path. One was the decision in April 2004 by the Securities and Exchange Commission, at a meeting attended by virtually no one and largely overlooked at the time, to allow big investment banks to increase their debt-to-capital ratio (from 12:1 to 30:1, or higher) so that they could buy more mortgage-backed securities, inflating the housing bubble in the process. In agreeing to this measure, the S.E.C. argued for the virtues of self-regulation: the peculiar notion that banks can effectively police themselves. Self-regulation is preposterous, as even Alan Greenspan now concedes, and as a practical matter it can't, in any case, identify systemic risks -- the kinds of risks that arise when, for instance, the models used by each of the banks to manage their portfolios tell all the banks to sell some security all at once.

As we stripped back the old regulations, we did nothing to address the new challenges posed by 21st-century markets. The most important challenge was that posed by derivatives. In 1998 the head of the Commodity Futures Trading Commission, Brooksley Born, had called for such regulation -- a concern that took on urgency after the Fed, in that same year, engineered the bailout of Long-Term Capital Management, a hedge fund whose trillion-dollar-plus failure threatened global financial markets. But Secretary of the Treasury Robert Rubin, his deputy, Larry Summers, and Greenspan were adamant -- and successful -- in their opposition. Nothing was done.

No. 3: Applying the Leeches

Then along came the Bush tax cuts, enacted first on June 7, 2001, with a follow-on installment two years later. The president and his advisers seemed to believe that tax cuts, especially for upper-income Americans and corporations, were a cure-all for any economic disease -- the modern-day equivalent of leeches. The tax cuts played a pivotal role in shaping the background conditions of the current crisis. Because they did very little to stimulate the economy, real stimulation was left to the Fed, which took up the task with unprecedented low-interest rates and liquidity. The war in Iraq made matters worse, because it led to soaring oil prices. With America so dependent on oil imports, we had to spend several hundred billion more to purchase oil -- money that otherwise would have been spent on American goods. Normally this would have led to an economic slowdown, as it had in the 1970s. But the Fed met the challenge in the most myopic way imaginable. The flood of liquidity made money readily available in mortgage markets, even to those who would normally not be able to borrow. And, yes, this succeeded in forestalling an economic downturn; America's household saving rate plummeted to zero. But it should have been clear that we were living on borrowed money and borrowed time.

The cut in the tax rate on capital gains contributed to the crisis in another way. It was a decision that turned on values: those who speculated (read: gambled) and won were taxed more lightly than wage earners who simply worked hard. But more than that, the decision encouraged leveraging, because interest was tax-deductible. If, for instance, you borrowed a million to buy a home or took a $100,000 home-equity loan to buy stock, the interest would be fully deductible every year. Any capital gains you made were taxed lightly -- and at some possibly remote day in the future. The Bush administration was providing an open invitation to excessive borrowing and lending -- not that American consumers needed any more encouragement.

No. 4: Faking the Numbers

Meanwhile, on July 30, 2002, in the wake of a series of major scandals -- notably the collapse of WorldCom and Enron -- Congress passed the Sarbanes-Oxley Act. The scandals had involved every major American accounting firm, most of our banks, and some of our premier companies, and made it clear that we had serious problems with our accounting system. Accounting is a sleep-inducing topic for most people, but if you can't have faith in a company's numbers, then you can't have faith in anything about a company at all. Unfortunately, in the negotiations over what became Sarbanes-Oxley a decision was made not to deal with what many, including the respected former head of the S.E.C. Arthur Levitt, believed to be a fundamental underlying problem: stock options. Stock options have been defended as providing healthy incentives toward good management, but in fact they are "incentive pay" in name only. If a company does well, the C.E.O. gets great rewards in the form of stock options; if a company does poorly, the compensation is almost as substantial but is bestowed in other ways. This is bad enough. But a collateral problem with stock options is that they provide incentives for bad accounting: top management has every incentive to provide distorted information in order to pump up share prices.

The incentive structure of the rating agencies also proved perverse. Agencies such as Moody's and Standard & Poor's are paid by the very people they are supposed to grade. As a result, they've had every reason to give companies high ratings, in a financial version of what college professors know as grade inflation. The rating agencies, like the investment banks that were paying them, believed in financial alchemy -- that F-rated toxic mortgages could be converted into products that were safe enough to be held by commercial banks and pension funds. We had seen this same failure of the rating agencies during the East Asia crisis of the 1990s: high ratings facilitated a rush of money into the region, and then a sudden reversal in the ratings brought devastation. But the financial overseers paid no attention.

No. 5: Letting It Bleed

The final turning point came with the passage of a bailout package on October 3, 2008 -- that is, with the administration's response to the crisis itself. We will be feeling the consequences for years to come. Both the administration and the Fed had long been driven by wishful thinking, hoping that the bad news was just a blip, and that a return to growth was just around the corner. As America's banks faced collapse, the administration veered from one course of action to another. Some institutions (Bear Stearns, A.I.G., Fannie Mae, Freddie Mac) were bailed out. Lehman Brothers was not. Some shareholders got something back. Others did not.

The original proposal by Treasury Secretary Henry Paulson, a three-page document that would have provided $700 billion for the secretary to spend at his sole discretion, without oversight or judicial review, was an act of extraordinary arrogance. He sold the program as necessary to restore confidence. But it didn't address the underlying reasons for the loss of confidence. The banks had made too many bad loans. There were big holes in their balance sheets. No one knew what was truth and what was fiction. The bailout package was like a massive transfusion to a patient suffering from internal bleeding -- and nothing was being done about the source of the problem, namely all those foreclosures. Valuable time was wasted as Paulson pushed his own plan, "cash for trash," buying up the bad assets and putting the risk onto American taxpayers. When he finally abandoned it, providing banks with money they needed, he did it in a way that not only cheated America's taxpayers but failed to ensure that the banks would use the money to re-start lending. He even allowed the banks to pour out money to their shareholders as taxpayers were pouring money into the banks.

The other problem not addressed involved the looming weaknesses in the economy. The economy had been sustained by excessive borrowing. That game was up. As consumption contracted, exports kept the economy going, but with the dollar strengthening and Europe and the rest of the world declining, it was hard to see how that could continue. Meanwhile, states faced massive drop-offs in revenues -- they would have to cut back on expenditures. Without quick action by government, the economy faced a downturn. And even if banks had lent wisely -- which they hadn't -- the downturn was sure to mean an increase in bad debts, further weakening the struggling financial sector.

The administration talked about confidence building, but what it delivered was actually a confidence trick. If the administration had really wanted to restore confidence in the financial system, it would have begun by addressing the underlying problems -- the flawed incentive structures and the inadequate regulatory system.

Was there any single decision which, had it been reversed, would have changed the course of history? Every decision -- including decisions not to do something, as many of our bad economic decisions have been -- is a consequence of prior decisions, an interlinked web stretching from the distant past into the future. You'll hear some on the right point to certain actions by the government itself -- such as the Community Reinvestment Act, which requires banks to make mortgage money available in low-income neighborhoods. (Defaults on C.R.A. lending were actually much lower than on other lending.) There has been much finger-pointing at Fannie Mae and Freddie Mac, the two huge mortgage lenders, which were originally government-owned. But in fact they came late to the subprime game, and their problem was similar to that of the private sector: their C.E.O.'s had the same perverse incentive to indulge in gambling.

The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, "I have found a flaw." Congressman Henry Waxman pushed him, responding, "In other words, you found that your view of the world, your ideology, was not right; it was not working." "Absolutely, precisely," Greenspan said. The embrace by America -- and much of the rest of the world -- of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.

Joseph Stiglitz, a Nobel laureate, is a professor of economics at Columbia University.

Robert Reich: The Mini Depression and the Maximum-Strength Remedy

9 November 2008
Robert Reich: The Mini Depression and the Maximum-Strength Remedy
by RR

Robert Reich

This is not the Great Depression of the 1930s, but nor is it turning out to be merely a bad recession of the kind we've experienced periodically over the last half century. Call it a Mini Depression. The employment report last Friday shows job losses accelerating, along with the number of Americans working part time who'd rather be and need to be working full time. Retail sales have fallen off a cliff. Stock prices continue to drop. General Motors is on the brink of bankruptcy. The rate of home foreclosures is mounting.

When Barack Obama takes office in January, he will inherit a mess. (Because I'm an informal economic adviser, I should remind anyone who reads this blog that it reflects only my thoughts and therefore should not be attributed to him or to anyone else advising him.) What to do?

First, understand that the main problem right now is not the supply of credit.

First, understand that the main problem right now is not the supply of credit. Yes, Wall Street is paralyzed at the moment because the bursting of the housing and other asset bubbles means that lenders are fearful that creditors won't repay loans. But even if credit were flowing, those loans wouldn't save jobs. Businesses want to borrow now only to remain solvent and keep their creditors at bay. If they fail to do so, and creditors push them into reorganization under bankruptcy, they'll cut their payrolls, to be sure. But they're already cutting their payrolls. It's far from clear they'd cut more jobs under bankruptcy reorganization than they're already cutting under pressure to avoid bankruptcy and remain solvent.

This means bailing out Wall Street or the auto industry or the insurance industry or the housing industry may at most help satisfy creditors for a time and put off the day of reckoning, but industry bailouts won't reverse the downward cycle of job losses.

The real problem is on the demand side of the economy.

Consumers won't or can't borrow because they're at the end of their ropes. Their incomes are dropping (one of the most sobering statistics in Friday's jobs report was the continued erosion of real median earnings), they're deeply in debt, and they're afraid of losing their jobs.

Introductory economic courses explain that aggregate demand is made up of four things, expressed as C+I+G+exports. C is consumers. Consumers are cutting back on everything other than necessities. Because their spending accounts for 70 percent of the nation's economic activity and is the flywheel for the rest of the economy, the precipitous drop in consumer spending is causing the rest of the economy to shut down.

I is investment. Absent consumer spending, businesses are not going to invest.

Exports won't help much because the of the rest of the world is sliding into deep recession, too. (And as foreigners -- as well as Americans -- put their savings in dollars for safe keeping, the value of the dollar will likely continue to rise relative to other currencies. That, in turn, makes everything we might sell to the rest of the world more expensive.)

Government is the spender of last resort. Government spending lifted America out of the Great Depression. It may be the only instrument we have for lifting America out of the Mini Depression.

That leaves G, which, of course, is government. Government is the spender of last resort. Government spending lifted America out of the Great Depression. It may be the only instrument we have for lifting America out of the Mini Depression. Even Fed Chair Ben Bernanke is now calling for a sizable government stimulus. He knows that monetary policy won't work if there's inadequate demand.

So the crucial questions become (1) how much will the government have to spend to get the economy back on track? and (2) what sort of spending will have the biggest impact on jobs and incomes?

The answer to the first question is "a lot." Given the magnitude of the mess and the amount of underutilized capacity in the economy-- people who are or will soon be unemployed, those who are underemployed, factories shuttered, offices empty, trucks and containers idled -- government may have to spend $600 or $700 billion next year to reverse the downward cycle we're in.

The answer to the second question is mostly "infrastructure" -- repairing roads and bridges, levees and ports; investing in light rail, electrical grids, new sources of energy, more energy conservation. Even conservative economists like Harvard's Martin Feldstein are calling for government to stimulate the economy through infrastructure spending. Infrastructure projects like these pack a double-whammy: they create lots of jobs, and they make the economy work better in the future. (Important qualification: To do this correctly and avoid pork, the federal government will need to have a capital budget that lists infrastructure projects in order of priority of public need.)

Government should also spend on health care and child care. These expenditures are also double whammies: they, too, create lots of jobs, and they fulfill vital public needs.

Expect two sorts of arguments against this. The first will come from fiscal hawks who claim that the government is already spending way too much. Even without a new stimulus package, next year's budget deficit could run over a trillion dollars, given the amounts to be spent bailing out Wall Street and perhaps the auto industry, and providing extended unemployment insurance and other measures to help those in direct need. The hawks will argue that the nation can't afford giant deficits, especially when baby boomers are only a few years away from retiring and claiming Social Security and Medicare.

They're wrong. Government spending that puts people back to work and invests in the future productivity of the nation is exactly what the economy needs right now. Deficit numbers themselves have no significance. The pertinent issue is how much underutilized capacity exists in the economy. When there's lots of idle capacity, deficit spending is entirely appropriate, as John Maynard Keynes taught us. Moving the economy to fuller capacity will of itself shrink future deficits.

The second argument will come from conservative supply-siders who will call for income-tax cuts rather than spending increases. They'll claim that individuals with more money in their pockets will get the economy moving again more readily than can government. They're wrong, for three reasons. First, income-tax cuts go mainly to upper-income people who tend to save rather than spend. Most Americans pay more in payroll taxes than in income taxes. Second, even if a rebate could be fashioned, people tend to use those extra dollars to pay off their debts rather than buy new goods and services, as we witnessed a few months ago when the government sent out rebate checks. Third, even when individuals purchase goods and services, those purchases tend not to generate as many American jobs as government spending on the same total scale because much of what consumers buy comes from abroad.

Fiscal hawks and conservative supply siders notwithstanding, a major stimulus is in order. Government is the spender of last resort, and the nation is coming close to its last resort.

Robert B. Reich is Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written eleven books (including his most recent, Supercapitalism, which is now out in paperback). Mr. Reich is co-founding editor of The American Prospect magazine. His weekly commentaries on public radio’s "Marketplace" are heard by nearly five million people. This entry appeared on his blog.

Copyright 2008 Robert B. Reich

Unhappy America

Here's a good article I read in The Economist on America.

America
Unhappy America

Jul 24th 2008
From The Economist print edition
If America can learn from its problems, instead of blaming others, it will come back stronger

NATIONS, like people, occasionally get the blues; and right now the United States, normally the world’s most self-confident place, is glum. Eight out of ten Americans think their country is heading in the wrong direction. The hapless George Bush is partly to blame for this: his approval ratings are now sub-Nixonian. But many are concerned not so much about a failed president as about a flailing nation.

One source of angst is the sorry state of American capitalism (see article). The “Washington consensus” told the world that open markets and deregulation would solve its problems. Yet American house prices are falling faster than during the Depression, petrol is more expensive than in the 1970s, banks are collapsing, the euro is kicking sand in the dollar’s face, credit is scarce, recession and inflation both threaten the economy, consumer confidence is an oxymoron and Belgians have just bought Budweiser, “America’s beer”.

And it’s not just the downturn that has caused this discontent. Many Americans feel as if they missed the boom. Between 2002 and 2006 the incomes of 99% rose by an average of 1% a year in real terms, while those of the top 1% rose by 11% a year; three-quarters of the economic gains during Mr Bush’s presidency went to that top 1%. Economic envy, once seen as a European vice, is now rife. The rich appear in Barack Obama’s speeches not as entrepreneurial role models but as modern versions of the “malefactors of great wealth” denounced by Teddy Roosevelt a century ago: this lot, rather than building trusts, avoid taxes and ship jobs to Mexico. Globalisation is under fire: free trade is less popular in the United States than in any other developed country, and a nation built on immigrants is building a fence to keep them out. People mutter about nation-building beginning at home: why, many wonder, should American children do worse at reading than Polish ones and at maths than Lithuanians?
The dragon’s breath on your shoulder

Abroad, America has spent vast amounts of blood and treasure, to little purpose. In Iraq, finding an acceptable exit will look like success; Afghanistan is slipping. America’s claim to be a beacon of freedom in a dark world has been dimmed by Guantánamo, Abu Ghraib and the flouting of the Geneva Conventions amid the panicky “unipolar” posturing in the aftermath of September 11th.

Now the world seems very multipolar. Europeans no longer worry about American ascendancy. The French, some say, understood the Arab world rather better than the neoconservatives did. Russia, the Gulf Arabs and the rising powers of Asia scoff openly at the Washington consensus. China in particular spooks America—and may do so even more over the next few weeks of Olympic medal-gathering. Americans are discussing the rise of China and their consequent relative decline; measuring when China’s economy will be bigger and counting its missiles and submarines has become a popular pastime in Washington. A few years ago, no politician would have been seen with a book called “The Post-American World”. Mr Obama has been conspicuously reading Fareed Zakaria’s recent volume.

America has got into funks before now. In the 1950s it went into a Sputnik-driven spin about Soviet power; in the 1970s there was Watergate, Vietnam and the oil shocks; in the late 1980s Japan seemed to be buying up America. Each time, the United States rebounded, because the country is good at fixing itself. Just as American capitalism allows companies to die, and to be created, quickly, so its political system reacts fast. In Europe, political leaders emerge slowly, through party hierarchies; in America, the primaries permit inspirational unknowns to burst into the public consciousness from nowhere.

Still, countries, like people, behave dangerously when their mood turns dark. If America fails to distinguish between what it needs to change and what it needs to accept, it risks hurting not just allies and trading partners, but also itself.
The Asian scapegoat

There are certainly areas where change is needed. The credit crunch is in part the consequence of a flawed regulatory system. Lax monetary policy allowed Americans to build up debts and fuelled a housing bubble that had to burst eventually. Lessons need to be learnt from both of those mistakes; as they do from widespread concerns about the state of education and health care. Over-unionised and unaccountable, America’s school system needs the same sort of competition that makes its universities the envy of the world. American health care, which manages to be the most expensive on the planet even though it fails properly to care for the tens of millions of people, badly needs reform.

There have been plenty of mistakes abroad, too. Waging a war on terror was always going to be like pinning jelly to a wall. As for Guantánamo Bay, it is the most profoundly un-American place on the planet: rejoice when it is shut.

In such areas America is already showing its genius for reinvention. Both the Republican and Democratic presidential candidates promise to close Guantánamo. As his second term ticks down, even Mr Bush has begun to see the limits of unilateralism. Instead of just denouncing and threatening the “axis of evil” he is working more closely with allies (and non-allies) in Asia to calm down North Korea. For the first time he has just let American officials join in the negotiations with Iran about its fishy nuclear programme (see article).

That America is beginning to correct its mistakes is good; and there’s plenty more of that to be done. But one source of angst demands a change in attitude rather than a drive to restore the status quo: America’s relative decline, especially compared with Asia in general and China in particular.

The economic gap between America and a rising Asia has certainly narrowed; but worrying about it is wrong for two reasons. First, even at its present growth rate, China’s GDP will take a quarter of a century to catch up with America’s; and the internal tensions that China’s rapidly changing economy has caused may well lead it to stumble before then. Second, even if Asia’s rise continues unabated, it is wrong—and profoundly unAmerican—to regard this as a problem. Economic growth, like trade, is not a zero-sum game. The faster China and India grow, the more American goods they buy. And they are booming largely because they have adopted America’s ideas. America should regard their success as a tribute, not a threat, and celebrate in it.

Many Americans, unfortunately, are unwilling to do so. Politicians seeking a scapegoat for America’s self-made problems too often point the finger at the growing power of once-poor countries, accusing them of stealing American jobs and objecting when they try to buy American companies. But if America reacts by turning in on itself—raising trade barriers and rejecting foreign investors—it risks exacerbating the economic troubles that lie behind its current funk.

Everybody goes through bad times. Some learn from the problems they have caused themselves, and come back stronger. Some blame others, lash out and damage themselves further. America has had the wisdom to take the first course many times before. Let’s hope it does so again.