How to respond to the Global Financial Crisis?

It is clear that the United States has sparked the 2008 global economic crisis, with severe impacts persisting despite international response. The past 12 months have forced the international economy to see the “deep interconnections that have come to exist between different areas of the world, especially those between Europe and the U.S.” (U.S. Chamber of Commerce: Why Europe Matters).

With the burst of our nation’s housing bubble, subprime mortgage crisis, and eventual financial system collapse had a contagion effect on the world. So, the question is “How as a nation of many businesses should respond, and prevent such a crisis from repeating again?” Should we continue to work with Europe, Mexico, Asia, Africa, and South America?

The American commercial ties with Europe have created a market for goods and services, domestic employment for European firms, generator of growth and income, and opportunity for investment. Our Europe-Eurasia team at the U.S. Chamber of Commerce “seeks to further trade and investment, remove regulatory barriers, and improve transatlantic regulations at all levels.” ((U.S. Chamber of Commerce: Why Europe Matters). Joseph Stilgitz argues that many of the ad hoc methods of crisis response have hurt the U.S and the global economy in the past.

The U.S. Chamber of Commerce recommends that we continue our international engagement specifically with regards to trade, foreign investment in the U.S., and U.S. investment overseas. However, we must continue to develop international trade given that “Ninety-seven percent of America's exporters are small businesses, not large, multinational corporations” (U.S. Chamber of Commerce). Importing “Keeps inflation low and expand the array of choices available for American families. Tariff reductions in the 1990s increased the typical family's purchasing power by as much as $2,000.” Do we seek to stabilize the purchasing power? Should foreign companies continue to invest in the U.S. marketplace? Yes. However, if our financial markets are not safe, these foreign companies will pull out. Joseph Stilgitz stated, “Unfettered financial markets do not work, and the current regulation and regulatory institutions failed — partly because one is not likely to get effective regulation when there are regulators who do not believe in regulation.”

Finally, U.S. investment overseas must continue, for the beneficial effects of sales to continue generating profits and create jobs. Despite the desire for protectionist trade policy, international engagement benefits extend across the world. Cooperation among governments and central banks around the world must continue. We want to encourage monetary easing, but careful evaluation of the potential fiscal stimulus. We believe that another “short-term stimulus could have serious longer-term effects on inflation and interest rates” (U.S. Chamber of Commerce). In a time of economic uncertainty, the U.S. Chamber of Commerce seeks to increase global engagement. Such engagement “has also improved the state of the world, promoting peaceful exchange and lifting hundreds of millions of people out of poverty through more open markets and trade-generated growth” (U.S. Chamber of Commerce).