Buried in the many chronicles of the recent stock market collapse is a humbling new theme about the United States' role in the world: It is dependent upon foreign countries in ways that are novel and disturbing for a superpower.
These concerns--arising from persistent budget deficits and the nation's habit of buying far more from other countries than it sells to them--are reflected in a weakening dollar that has become a disruptive force in financial relations throughout the world. They have reduced America's stature from a nation that lends money to one that borrows it.
But the dollar's fall may spark a change that is more than economic, one with historic implications. With the currency at its lowest point since World War II--an event that catapulted this country into world economic supremacy--many observers now question whether that preeminence is ending and the current difficulties signal a new era of waning U.S. political, social and economic influence throughout the world.
The sagging dollar reduces the real value of U.S. foreign aid for many countries. It forces up the cost of maintaining a far-flung military presence. And it sparks continuing concerns that foreign countries will back away from their U.S. investments, which this country now requires in order to stay solvent.
In addition, the need for a continual flow of foreign investment in Treasury securities makes the United States much more beholden to foreign confidence in its policies than before. When foreigners worry about protectionism in Congress, for example, the American public now pays for it in the form of higher interest rates.
Perception to Overcome
And when Administration officials attempt to convince other nations to adopt certain policies--to stimulate their own economies, for example--they must overcome the perception that the United States doesn't have the right to make such recommendations, because its own economic house is so obviously in need of repair.
"The Reagan Administration is one of the final chapters in American influence abroad," argues Harvard economist John Kenneth Galbraith. "No question. We're going to see that in a dozen different ways."
While many would consider that indictment too severe, the point is made somewhat differently by Robert Dunn Jr., an economics professor at George Washington University: "It's a little hard for anyone to take us seriously at the moment--when we owe the rest of the world 400 billion bucks."
There are, of course, profound differences between this country and the debt-ridden Third World clients of the International Monetary Fund. The United States remains wealthy and a magnet for investors throughout the world. Unlike other debtor nations, it has the privilege of repaying loans in its own currency, which remains enormously influential. It leads the world in the creation of jobs and still ranks as the strongest country on earth.
But at the same time other economies now compete with the United States for world leadership, and in some respects have eclipsed it. These developments have implications for future standards of living, defense obligations and how the nation is seen by its rivals and by its own citizens. Consider:
- Last year, West Germany led the world in exports, the first time the United States finished second in this category in the postwar era, according to the Commerce Department. Germany exported $243 billion worth of autos, machinery, chemicals and other products. The United States barely clung to second place, with $217 billion in exports, just ahead of hard-charging Japan at $211 billion.
- The nation also has lost ground as a financial power. In a survey of the world's largest banks by the American Banker, a trade newspaper, no U.S. bank ranked in the top 10 in 1986. Only one--Citibank of New York--ranked in the top 25. Each of the seven largest banks in the world was Japanese.
- In 1985, the amount of private investment in the United States exceeded the amount of U.S. investment abroad. That hasn't happened since 1914, according to the Commerce Department.
'Art of Interdependence'
The consequences may be great for the style of U.S. behavior in the world. "I think what will be required of the new generation of American leaders will be skill in the arts of interdependence," said John David Maguire, president of the Claremont Graduate School. Maguire, whose background is in theology, defines interdependence as "diplomacy, compromise, negotiation, trying to find common interests--in contrast to a situation where you impose your self-interest, narrowly defined."
Since early 1985, U.S. officials have reasoned that the nation's self-interest was in a cheaper dollar. The idea has been that it would make U.S. goods cost less than the foreign competition. And while there have been some encouraging signs that U.S. manufacturers might benefit from the trend, the lower-valued dollar is troublesome as well.