This week, as Washington navel-gazed its way into a shutdown, its actions didn’t go unnoticed abroad. In Turkey, Recep Tayyip Erdogan, the Prime Minister of Turkey, took the opportunity to gloat about the U.S.’s refusal to pay its federal workers, many of whom are on furlough because of the shutdown. “We are now witnessing the crisis in the U.S. We have never been a government that could not pay its personnel,” Erdogan said.
This is how America’s dysfunction at home is undermining its credibility abroad. The latest development: Obama’s desire to maintain laser focus on the Republicans for political gain has prompted him to cancel a pivotal trip to Asia to attend an Asia-Pacific Economic Cooperation meeting. But it’s not just the shutdown: it is a series of issues over the past decade, chief among them the financial crisis. For decades the U.S. had been espousing the virtues of free market capitalism, urging other countries to adopt the model. America’s exceptional economic success, the thinking went, allowed it to give advice about how other countries should build their own economies.
And then the bottom fell out. The crisis, spurred by lax regulations that were manipulated by the big banks, started in the United States, before its impact spread globally. An unemployment and debt crisis soon followed. So did a rush to rethink the way countries handle their economies. With the free-market system no longer sacrosanct, countries with other approaches were happy to second-guess the system. China’s state capitalist model became a viable alternative as it navigated the financial crisis much better than most. I’ll never forget my meeting with Chinese Vice Foreign Minister He Yafei in 2009, when he asked me outright, “Now that the free market has failed, what do you think is the proper role for the state in the economy?” The financial crisis was an opportunity to reopen the debate surrounding perceived global values — and to kick the U.S. system while it was down.