Some clues to the U.S. recoveryThe United States is the obvious culprit that put the global economy in a bad predicament for the past 10 years. The global financial crisis originated from America, ignited by the subprime mortgage debacle in 2007 and the bankruptcy of Lehman Brothers in 2008. Europe has yet to fully get over the crisis, but now the U.S. economy is recovering. It has left all of its friends in a fiscal quagmire and gotten out first.
Economic indicators have returned to a level when the U.S. economy thrived. The unemployment rate has gone down and housing prices are up. The stock market is coming off a record-setting rally in 2013. The Federal Reserve, under the leadership of Ben Bernanke, has led the recovery. The Fed’s prompt decision to lower its benchmark interest rate to near zero and institute quantitative easing worked. But that’s not all. Japan used the same measures when its bubble burst in the 1990s. Bernanke himself said at the speech celebrating the centennial of the Federal Reserve that the measures were not special and had all been tried by central banks at times of crisis.
The latest economic slump is called the Great Recession, unlike the Great Depression of the 1930s. Once the economy loses its vitality, it is hard to get it back again. Pouring in money will not boost the market. Many elements that make up the real economy must move together. Earlier this month, there were signs that may indicate how the U.S. economy revived. The first was the Senate approval of Janet Yellen to succeed Bernanke by a vote of 56 to 26. Yellen was approved despite many votes against her. But on the day of the voting, numerous flights were canceled due to a massive winter storm. Dozens of senators did not make the session, but 10 Republicans traveled to Washington to cast their votes for Yellen. The federal government shut down for 16 days in October when Congress failed to reach a budget agreement, but the politicians did their best to do their job in the Yellen vote.
The second sign was the Boeing union vote. Based in Washington, the biggest aircraft maker in the world threatened to relocate during negotiations with its union over limiting wage increases and freezing pensions, which are among the highest in the United States. Then 22 states offered various subsidies and benefits to lure in Boeing. The company seriously considered moving to an area less friendly to unions. But the state of Washington promised $8.7 billion in subsidies to keep Boeing from leaving, and union members changed their minds, accepting a reduction in benefits to keep their jobs.
America’s example of overcoming the Great Recession will be studied by economists in the future. And the arduous process would provide lessons to Korean politics and labor relations.
The author is the New York correspondent for the JoongAng Ilbo.
by LEE SANG-RYEUL