America is not the only country now struggling to restructure its public balance sheet. However, we are peculiar in two ways.
First, typically governments in crisis restructure their public sector in exchange for a financial lifeline from a foreign government or international financial institution. For instance, Greece is restructuring so that it can get some relief from the European Union. When countries in Asia, Latin America, and also Central and Eastern Europe restructured late last decade, it was called structural adjustment, i.e. the conditions placed upon them in order to get IMF assistance. Public officials involved in restructuring those governments at the time, genuinely or not, blamed outsiders for the decisions taken.
We are struggling in Washington to structurally adjust ourselves. Not an easy task, regardless of its advisability.
Second, other countries such as Greece vote on the streets against the structural adjustment of their public sector.
If you believe the polls, Americans favor some sort of structural adjustment so long as it doesn't forever alter either our basic social contract or sense of rugged individualism.
For this reason, it is likely that a solution will emerge in Washington, more or less balanced. The parameters of debate contained.
However, our more difficult challenge still lies ahead.
Despite the criticism leveled on Tim Geithner and Larry Summers, each learned from prior structural adjustments of which they were a part. Most importantly, unlike the post-Soviet restructurings, we did not allow our cities and states to fail during the height of the crisis. We extended them a lifeline.
Nonetheless, we have yet to learn the most important lesson from the Asian and Latin America crises. Those countries emerged, surged and now have healthy front accounts, because they leveraged private dollars to fuel economic growth strategies as they restructured their debt.
I think we can learn two lessons here: (1) we should give our U.S. Treasury purchasers a productive investment avenue as we deliver our public balance sheets, China should invest in building out our physical infrastructure for competitiveness sake and (2) we should open up our mines and natural energy sources in a way that syncs with our public values, as we aggressively finance clean energy sources. Fuel, primary commodities and infrastructure -- domestically sourced -- are essential for factories and, in turn, jobs to sprout up. We must affirm our self-determination.
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