Transcript
ESWAR PRASAD: These are very difficult and challenging times in the world economy and of course we have a huge change coming forth in Washington, D.C. and it's an important time for the U.S. economy as well as for the global economy. There was this notion that the center of world policies and economics was beginning to shift eastward, or westward I guess, depending on which way you like to travel, but there was this notion that the U.S. was becoming a little less important in the overall world economy. To a large extent of course that is true with many of the emerging-market economies coming into their own, but as the recent financial crisis has shown, the world has become substantially more interconnected through trade, financial, and human capital flows around the world in the last couple of decades and the U.S. still retains a very important position in the world economy. So I think getting economic policies right in the U.S. is essential not just for the U.S., but for the larger global economy, and the prospects for the global economy depend to a significant extent on how things turn out in the U.S. again, as we have seen recently where capitalism in the U.S. has had worldwide effects.
In terms of thinking about what role the U.S. should play, I'd like to structure my comments in two specific dimensions. One is thinking about the U.S. and its own macroeconomy financial and regulatory policies which I think have very large spillover effects on the world economy, and then to think more broadly about this notion of soft power, how the U.S. actually exercises its economic and political influence around the world. Here I am going to argue for a substantial change relative to what we have seen in the last 8 years where there was much more of a focus on unilateralism, and I think the world had come to some extent to resent the U.S. essentially telling the rest of the world what to do. But I think the U.S. still has a dominance that it can use very effectively and the opportunity is there if it can be grand.
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