Despite steady job growth and low inflation, many Americans remain pessimistic about where the country is headed. Those surveyed in a recent Gallup poll expressed the lowest confidence in the economy since December, with 54 percent saying it’s getting worse. That’s understandable. A succession of violent incidents and natural disasters can obscure longer-term progress.
But progress is indeed being made, according to several experts at a small conference in South Korea who recently concluded that America is back. At the meeting, sponsored by the Asian Institute for Policy Studies — an independent think tank based in Seoul — speakers described how actions the US took during the throes of the 2008 financial meltdown eventually came to strengthen its standing as the world's economic and energy leader.
By far the most important global firefighting weapon deployed after the collapse of Lehman Brothers was foreign currency swaps, according to Benn Steil, director of international economics at the Council on Foreign Relations, and a speaker at the conference. He said it could be argued that there would be no European banking system today had it not been for the currency swaps provided by the Federal Reserve. The dollar and the institutions that shepherd it, especially the US Treasury, have become far more significant since the financial crisis.
The Chinese have tried to replicate what the US did by expanding foreign currency swaps across the globe, partly to make the yuan an attractive alternative to the dollar for international trade and finance. About 30 central banks have signed swap agreements with the Chinese, but few countries have opened the tap. The dollar, not the yuan, is still the world's favorite currency when the going gets tough.
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Despite public and political outrage over actions the Fed took to staunch losses at the time, it helped preserve capital by stabilizing the financial institutions, which meant there was money available for new development — especially fracking.
At the Seoul gathering, Philip Andrews-Speed — principal fellow of the Energy Studies Institute of the National University of Singapore — said he considers fracking a return to the glory days when America excelled at industrializing science. Whether it was "the development of electricity, the telephone, the motor car, or IT, America was the one that industrialized and produced whatever stuff it was at scale," he said.
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Since 2008, US oil production has increased by 4 million barrels a day — a million more barrels than Iraq aspires to produce. It is the total of Kuwait and the United Arab Emirates' daily output combined, according to Mikkal Herberg, research director at the National Bureau of Asian Research. This energy production has not only helped cut prices, but has reinvigorated manufacturing in the US.
The US surpassed Russia in 2009 as the world's largest natural gas producer and plans to start exporting liquid natural gas by the end of the year. As a potential supplier to energy-thirsty Europe, Asia, and South America, the country could use this "soft" power to achieve other goals, such as arms control, environmental improvement, or human rights compliance.
Most crucially, the surge in US energy production means that the military no longer has to defend oil-producing countries in the Middle East or elsewhere as a matter of routine.
While it's reassuring to see an upbeat long-distance view of our country's economic strength, it's regrettable that much of it is because of fracking, which involves fossil fuels. To build on any sense of optimism, we need to figure out how to make fracking an interim step to sustainable energy development, not the final answer to our energy needs. America is back — back to the daily struggle of trying to get it right.
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Susan E. Reed writes regularly for the Globe. She can be reached at thediversityindex@gmail.com.
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