The long-term effect of the financial meltdown on American interests is going to take years, if not a decade, to fully unravel. One of this country's longtime strengths in the world economy was not only the depth and sophistication of its financial markets, but the perceived stability and security of the financial system itself. Now that the image has been cracked (if not shattered) by recent events, it remains to be seen if foreign investors will continue to see America's financials as an attractive investment.
In the midst of this country's financial crisis, an equally disturbing but far less impactful social crisis has been taking place in China. Milk manufacturers had been putting the toxic chemical melamine in their products, poisoning tens of thousands of children and killing four. Parents throughout China are furious - both at the manufacturers and at the lax regulation that allowed such an event to take place. It thus far appears to be one of those rare events in modern China that is forcing the central government to act lest they risk discontent.
American furor over the fraud and negligent business practices that lie at the center of the current economic problem has been no less strident. Part of the gridlock in Washington over the failed $700 billion bill to bail out American banks was in no small part due to angry constituents putting pressure on lawmakers over what is seen as a reward rather than a punishment for dishonest business practices.
What brings these two seemingly unrelated events together is the economic system in which they took place. The United States and now China both have capitalist economies based on free market principles. In the United States, it's only been strong crises that have brought on regulation - normally as a sort of ad hoc fix. While it's not accurate to think of the U.S. economy as a strict free market, it's clear that American fiscal policy is different from that of Europe or other more socialized economic systems.
The natural question that arises from these events is whether societies (even ones as culturally different as the United States and China) have the sort of good-faith, societal trust that is required to avoid such crises in relatively unregulated economic markets. In an article in Time, Bill Saporito wonders if we haven't turned into France, writing "We're now no different from any of those Western European semi-socialist welfare states that we love to deride." Writers like Saporito and others are wondering if the United States will move toward states like France who have highly nationalized financial sectors in order to avoid the corruption that seems to follow from a lack of governmental oversight.
Meanwhile, a growing intellectual movement in China has been criticizing the government for, ironically, not having enough socialization in the economy. Seeking to return to values of social responsibility, this movement also wants China to avoid the stricter free market thinking that has characterized the United States economic philosophy.
The fundamental questions these crises bring up are ones that the university, and the generation of students now enrolled here, will have to address. Our solution may not be a shift to a more European approach, but at the least it will entail some way of ensuring our trust isn't violated again.
Hunter Pavela is a senior Chinese and philosophy major. He can be reached at hpavela@umd.edu.
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