Thursday, January 24, 2008

American Exceptionalism

It has been interesting watching the international markets react to our economic "troubles". The weak dollar has made foreign investment in the US even more attractive. It is an interesting dynamic. I have always thought that a large part of the international economy is based not on our economy per se (think dollar value) but rather on the stability and predictability of our economy. Gainful economies require order and predictability and most nations’ economies “borrow” or “invest” in our order and predictability to stabilize their own economies. Looks like foreign markets are rebounding on word of our "stimulus" package. A package not designed to bring any real economic change, only temporary order and predictability.

These foreign markets rely not just on the value of the dollar and performance of our markets but on the predictability and strength of the US economy. This begs the question “what is the US economy?” What are the various parts that matter? I don’t mean economic indicators, I mean the actual parts: industry, research and development, innovation, emerging markets, industrial standards, productivity, acceptance of risk and enforcement. These things that the US provides are the pillars of the world economy, not because we choose for them to be pillars, but because the ordered predictability of our economy makes it that way. If this predictability and order was hypothetically provided by China or some other country then that country would be the pillar that world economies leaned on.

As it is, the world leans on us. This phenomenon is part of what is known as American exceptionalism. Most would point to other more tangible variables to explain this exceptionalism, variables like our constitution, republicanism or environmental explanations such as geography, climate, availability of natural resources, social structure, and type of political economy. These variables are not what actually make our country exceptional, rather it is the reaction of other nations to these varibles in action. None of these variables are exclusive to the United States of America. Other nations have similar political economies, more natural resources, friendlier georgraphy and climate. Why then are these nations not exceptional. A better question, why then are these nations not treated exceptionally by other nations?

You see it is not the variables nor the outcome that makes America exceptional, rather it is the fact that we are treated exceptionally by other nations. We are held to different standards and given larger responsibilities, not because we ask to be exceptional but because others ask it of us. So it is the act of others asking and us acting that makes us different from all other nations in world. There is no arrogance nor benevolence to this relationship. We did not ask for this responsibility but neither can we shrink from it. It is just the way it is. So as Dubai, and the United Arab Emirates buy up our resorts, ports and bail out our banks ask yourself what it is they are really investing in? What makes this American investment more attractive than another? The answer? The exceptional security provided by the US in the form of order and predictability, something in short supply in the Middle East.

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