At the start of a new century, the world situation remains in flux. The much-heralded “new world order” has yet to arrive. The United States, of course, holds the key. Developments in the next few years — not only in the field of economics, but also in politics and security — will depend largely on how the administration of President-elect George W. Bush will move in pursuing its domestic and foreign policies.

The biggest concern at the moment is how the slowing U.S. economy will develop in coming months. America’s longest economic boom began losing steam in late 2000 following a crash in Internet-related stocks. U.S. gross domestic product grew at an annual rate of 2.2 percent in the third quarter of last year, down sharply from the 4-5 percent of the previous four years. In December alone, online businesses laid off more than 10,000 workers, bringing to over 40,000 the total number of jobs they had shed during the year.

The U.S. slowdown is casting a shadow over East Asian economies that have only just begun to recover from the economic crisis of 1997-98. They all depend on the U.S. market for exports. In strife-torn Indonesia in particular, economic hardship will further destabilize the political situation. Should the U.S. economy make a “crash landing,” East Asia and other regions would be hit hard, with dire consequences for global growth.

Certainly, U.S. stock markets gained in sharp response to Wednesday’s surprise interest-rate cut by the Federal Reserve. Information-technology-related stocks staged a dramatic rebound. However, on Thursday, those markets only held their gains of the previous day, showing no signs of further progress. Moreover, Asian markets’ reactions, particularly that of the Japanese markets, remained weak.

Viewed from this side of the Pacific, therefore, the U.S. interest-rate cut has yet to produce an effect strong enough to dissipate concerns over a U.S. recession. There are obvious reasons for this. The U.S. savings rate continued to fall during the boom, as consumers spent more than they earned. As a result, overall consumer debt has reached a record $7.5 trillion. Corporate debt has also hit an all-time high, $10.6 trillion. International payments deficits have likewise climbed to an alarming level, topping 4 percent of GDP. The boom could quickly turn into a bust if the virtuous cycle of growth comes to a halt.

For now, Mr. Bush is sticking to his campaign promise of a $1.3-trillion tax cut spread over 10 years. However, Federal Reserve Chairman Alan Greenspan has expressed reservations about the plan. While the specific direction of U.S. fiscal and monetary policy remains to be seen, Japan will likely come under further pressure to stimulate domestic growth.

In the political arena, the question of credibility hangs over Bush’s leadership. His narrow electoral victory, coming after a divisive debate over the crucial Florida vote count, is likely to tie his hands, as is the fact that he lost the popular vote to Democratic candidate Al Gore by a slight margin. It is also likely that the incoming administration will have difficulty in dealing with a Congress that is almost perfectly split between Democrats and Republicans.

There is also concern over the conduct of U.S. foreign and security policy. In East Asia, building a stronger Japan-U.S. alliance will be a priority. China will be treated as a “strategic and competitive partner,” as Mr. Bush himself put it — not a “strategic partner” as President Bill Clinton defined the relationship. It is possible that the next administration will become more committed to the defense of Taiwan and push for a theater missile defense system — a program strongly opposed by China. The advent of the Republican administration could also set back, if temporarily, the emerging unification process on the Korean Peninsula. The Republican Party, it should be noted, has strongly criticized the Clinton administration’s moves to improve ties with North Korea, such as the signing of an agreement providing for the U.S. to supply energy in exchange for an end to the North’s nuclear-weapons program.

In Western Europe, security policy could be put to the test. Center-left administrations in the region, notably those in Britain and Germany, working in tandem with the Clinton administration, have pursued a “Third Way” and established a “New Strategic Concept” for NATO. But Secretary of State-designate Colin Powell and other Bush aides are critical of “excessive” U.S. troop deployment abroad.

Perhaps the Bush team will spend the next six months or so on a steep learning curve. That could create a “pause” in their handling of international problems. Seen from here, therefore, the mid-range outlook for the U.S. is murky, both economically and politically.

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