Forbes Magazine - U.S. Troubles Are Truly Global

Op-Ed

Forbes Magazine - U.S. Troubles Are Truly Global

As the world's economies are pulling apart - moving in different directions, at different speeds - the Group of Eight leaders are meeting in Hokkaido, Japan.

But what should the United States expect from this year's G-8 summit?

At a minimum, it will be another reminder that no matter how hard we pull on our own oar, we will not get through these challenges without coordinated effort. We are no longer the sole engine of the global economy, nor can we solve our own problems in isolation.

The G-8 meeting should be an opportunity to restore some shared confidence to the world's shaky financial markets. It can also help us find a common course through global issues, such as energy and food, that confront not just advanced economies but also the peoples of other nations.

The housing bubble was "Made In The U.S.A.," but the low interest rates that fed it - and the larger contagion through repackaged debt - are part of a bigger picture. Global trade imbalances between the U.S. and the rest of the world have built up massive reserves overseas and public and private debt here at home.

Wider and deeper financial markets around the world - with additional fuel from China's and Japan's exchange-rate policies, sovereign wealth funds, highly leveraged hedge funds and other new players - made for cheap credit. These circumstances also provided the vectors to send "tainted" financial products to Germany, England and other countries far from our domestic housing market. In short, this is a housing-market bubble unlike any in U.S. history; it has global roots and global aftershocks.

As they face continued uncertainty, lenders remain cautious. To restore their confidence, we need to be transparent about these new financial players and instruments, from sovereign wealth funds to exotic investments.

The global markets will welcome a clear statement from the G-8 that a new, higher standard of financial transparency - and, moreover, accountability - is a shared priority of advanced economies, even if it isn't for the firms that profited from obscuring risk.

In another departure from historical precedent, a rapid jump in global food and fuel prices has come just as the U.S. economy is slowing down. This time, pressure is coming from developing nations, where investment and consumption are now approaching self-sustaining levels.

These actions are increasingly decoupled from our domestic financial weakness, but we are not decoupled from the global commodity markets they are driving. Because they hit families directly, spiking fuel and food prices are the most visible evidence of tight global markets in all commodities.

Oil prices have more than doubled in the last year, causing economic and political disruption. Inevitably, energy demand in the developing world will keep expanding. And since there's no room in our atmosphere for more carbon emissions, only a climate deal can create a global market for alternative energy.

Energy and climate, of course, are at the top of the G-8's agenda. We need a statement of shared commitment by these nations to reduce emissions 50% by 2050 - a level that scientific research tells us will avert climate disaster - and to agree to negotiate the gradual targets that will get us there.

Our leadership is needed to seal a global deal that will signal to the markets that the time has come for alternative energy sources and stimulate investment and job creation in new technologies.

Food, however, presents a different challenge. Growing demand worldwide for better and healthier diets should be a success story; with improved food supply and distribution, it can be. The international community must address the food crisis in a coordinated, strategic manner.

Africa will once again be a focus of this year's meeting, but the need is global. Right now, donors must keep the promises of financial assistance to Africa that they announced at the 2005 summit in the U.K. The U.S. is on track to meets its pledge by 2010, but the same is not true for other members of the G-8. And in the long term, we need another green revolution to bring the agricultural productivity of advanced economies to the rest of the world.

We should not expect miracles from this year's G-8 summit. But we should count on leaders to issue clear statements of common purpose that confront the world's shared challenges.

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