TW: As you may have heard Iceland's financial system has essentially imploded (not kinda imploded like ours, really imploded as in no one will trade with them for now, which btw is a real problem if you are an island of 300K folks with very limited agricultural and industrial resources). When we were in the UK a couple of weeks ago, the locking up of the Icelandic financial markets was big news. Apparently numerous local governments throughout the UK in search of higher yields had placed significant public funds (pension money etc.) in Icelandic banks. The local entities were squealing like stuck pigs bemoaning their potential exposure (i.e. wanting the UK or Icelandic govt's to bail them out, no one seemed to be asking why in the hell they put their money there in the first place). Friedman frames the Icelandic issue within the broader context of globalization.
Again as for the US, we can pout, stomp our feet and shriek say "country first" or we can dig in and embrace change with all its commensurate risks and opportunities.
From Friedman/NYT:
"...And therein lies the central truth of globalization today: We’re all connected and nobody is in charge...Globalization giveth — it was this democratization of finance that helped to power the global growth that lifted so many in India, China and Brazil out of poverty in recent decades. Globalization now taketh away — it was this democratization of finance that enabled the U.S. to infect the rest of the world with its toxic mortgages. And now, we have to hope, that globalization will saveth.
The real and sustained bailout from the crisis will happen when the strong companies buy the weak ones — on a global basis. It’s starting. Last week, Credit Suisse declined a Swiss government bailout and instead raised fresh capital from Qatar, the Olayan family of Saudi Arabia and Israel’s Koor Industries. Japan’s Mitsubishi bank bought a stake in Morgan Stanley, possibly rescuing it from bankruptcy and preventing an even steeper decline in the Dow. And Spain’s Banco Santander, which was spared from the worst of this credit crisis by Spain’s conservative banking regulations, is purchasing America’s Sovereign Bankcorp.
I suspect we will soon see the same happening in industry. And, once the smoke clears, I suspect we will find ourselves living in a world of globalization on steroids — a world in which key global economies are more intimately tied together than ever before.
It will be a world in which America will not be able to scratch its ear, let alone roll over in bed, without thinking about the impact on other countries and economies. And it will be a world in which multilateral diplomacy and regulation will no longer be a choice. It will be a reality and a necessity. We are all partners now.
http://www.nytimes.com/2008/10/19/opinion/19friedman.html
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