Economists, politicians and commentators around the world are asking: what is at the root of the global financial crisis? Voices have been raised assigning responsibility to China and other emerging economies. For example, the January 12 edition of The Nation magazine carries an article by Sherle Schwenninger, of the New America Foundation, that said: 'The root cause of this unbalanced world economy was the enormous pool of excess savings generated by China, Japan and, more recently, the petrodollar states of the Persian Gulf.'
Actually, such a view is not entirely new. In March 2005, Ben Bernanke, then a US Federal Reserve governor and now chairman, asked in a speech: 'Why is the United States, with the world's largest economy, borrowing heavily on international capital markets - rather than lending, as would seem more natural?'
He concluded that the causes of the US current-account deficit did not lie with profligate Americans who saved too little but, rather, with foreigners who saved too much. A 'global saving glut', he said, 'boosted US equity values and helped to increase US home values, as a consequence lowering US national saving and contributing to the nation's rising current-account deficit'.
Linkage of the rising fortunes of Chinese and declining fortunes of Americans is also the theme of a recent article in The New York Times, which was headlined: 'Dollar shift: Chinese pockets filled as Americans' emptied.' According to the article, some economists say that, 'China lulled American consumers, and their leaders, into complacency about their spendthrift ways.'
Now China is responding. Xinhua issued an article last week titled 'US blame game cannot change facts of financial crisis'. It asserted that 'outgoing US Treasury Secretary Henry Paulson has been playing a blame game' saying that 'failure to address the rise of emerging markets and resulting imbalances was partly to blame for the global financial crisis' and that 'Federal Reserve chairman Ben Bernanke is also part of the game' because 'he sees savings from countries like China as a cause of the property bubble in the US'.
Actually, Xinhua declared, 'it is widely accepted that the US low-interest-rate policy, which encouraged excessive spending and caused the subprime crisis, was at the root of the problem' and 'the woes of the US have inflicted pain on the world economy at large'.
Economists can argue all they like about the causes of the financial crisis, which many Asian leaders agree originated in the US. Ultimately, politicians decide on policy. And the next US president, Barack Obama, has taken aim squarely at who he sees as the culprits - all American - responsible for this crisis.
