While it is often difficult to escape the recency effect in evaluating these matters, it is quite plausible that two events on two days – 5th and 6th August 2011 – might be cited in the future as exemplifying the transforming world order of the late 2000s and early 2010s.
The first event – the downgrade by Standard & Poor’s (‘S&P‘) of the credit rating of the United States government from the stellar AAA to the more precarious AA+ with a negative outlook – was exactly the kind of measure that policymakers had been hoping to avoid by approving the Budget Control Act of 2011, signed into law by President Barack Obama on 2nd August 2011. Yet this piece of legislation, which purported to proffer a panacea to the ever-burgeoning sea of indebtedness flooding the American economy, fell short of what S&P deemed ‘necessary to stabilise the government’s medium-term debt dynamics‘; in other words, one of the ‘Big Three‘ credit rating agencies – an entity that is based in New York City and which has never labelled the US government as anything other than a borrower of the highest credibility – can no longer see beyond the inexorable tide of red ink.
The Chinese reaction to the historic downgrade (as published by the official Xinhua News Agency) – a cogent lecture delivered in a ‘no more Mr. Nice Guy’ tone – would be sobering enough. But in the context of the second event – the 2011 Supercoppa Italiana Final between AC Milan and Internazionale – it is enough to make one wonder whether the United States is already the junior partner in the G2. This match – the opening game of the Italian football season – was held, for the second time in three years, at Beijing’s Ai Weiwei-inspired National Stadium. Seventy thousand fans jammed into the stands to witness the cream of the footballing catwalk that is Serie A serve up a multinational delicacy: names such as Ibrahimović, Zanetti, Sneijder and Robinho danced across the turf, with AC running out 2-1 winners.
Pillars of pop culture, it seems, are relocating to the north-eastern PRC; worldwide, lenders may be forced to reconsider placing their assets in the United States. But what will the next 48 hours bring?