International Reaction to U.S. Stimulus

by Alyssa Landers

After the recent U.S. passage of the $789 billion dollar stimulus plan, the European Union (EU) is following suit, proposing many of the same measures as the U.S. government.  Specifically, the EU may be requiring all banks to report back to government in regards to their assets, as well as mandate their participation in the market.  France has also planned a similar auto-industry bail-out that would lend auto-makers 3 billion euro over a period of 5 years in exchange for a guarantee to keep plants running. 

 

Job losses overseas have also skyrocketed everywhere from the United States to South Africa, with no change in sight.  With unemployment levels at almost 30% currently, the nation of South Africa “hitherto fairly well protected by its well-regulated banking system from some of the squalls, will follow its main trading partners in America, Europe and Japan into a technical recession—two successive quarters of negative growth—for the first time in 17 years.”

 

Russia, like South Africa, had experienced a booming economy prior to the recent global crash.  However, Russian workers are not taking job losses in stride, with many taking to the streets to protest.  The Russian auto industry which, like in the United States, is on the decline, has suffered a huge blow due to the economic crisis, with many workers left jobless.  According to The New York Times, “when the economy was surging, Mr. Putin’s government had widespread support, and the opposition was marginalized. Now that times are tough, events in the Far East suggest broader rumblings.”    

 

Meanwhile, China pointed out recently that trade protectionism, part of the “buy American” mantra of the stimulus plan, can only lead to negative effects for global commerce.  G-7 nations (including Canada, France, Germany, Italy, Japan, Britain and the United States) also agreed that any movements toward protectionism were “populist measures” that would later be rebuked, pointing to the Great Depression as an example of the failings of protectionist trade policy within the context of promoting global prosperity.   

 

At the recent World Social Forum, a meeting of mostly-leftist “social movements,” nations such as Brazil recommended not only large-scale credit agency reform, but suggested that “the world’s economy should get a stimulus in the form of a green New Deal.”

 

Despite long-term considerations though, all countries affected by the crisis are vying to get their stimulus packages passed as expediently as possible.  Banks are now favoring domestic loaning policies, and citizens are demanding government subsidies to stay afloat.  Yet with the global economy largely at risk, a move toward economic nationalism could be damaging in the long-term.