ARI SHAPIRO, host:
At this time last year, the world was in the deepest financial crisis since the Great Depression. Economic confidence had plummeted and governments around the world face the prospect of social instability and unrest.
Back in February, the top U.S. intelligence official said global economic problems were a threat to U.S. national security. Since then, the financial crisis has eased, but its repercussions are still being felt.
NPR's Tom Gjelten joins us now to discuss the way the economy is affecting security issues at the beginning of this New Year. Good morning, Tom.
TOM GJELTEN: Good morning, Ari.
SHAPIRO: Do intelligence agencies still believe that the global economic situation is the top threat to American security?
GJELTEN: It's certainly a lot harder to argue that today with all these new concerns we now have about terrorism, about al-Qaida, but it's fair to say that the events of the past year and a half have reshaped the global economy, given us new things to worry about and changed the world political lineup in some significant ways. And this is partly what intelligence officials were talking about last February when they said the global financial crisis had become a security issue.
SHAPIRO: What do you mean when you say this has changed the global political lineup, in what ways?
GJELTEN: What I mean is that there have been winners and losers as a result of this process, as a result of this crisis. The big story of this year has to be China. In some ways, the Chinese actually used this crisis to strengthen their position in the global economy. They put in a big stimulus program early on and have now returned to very robust economic growth. It's possible China has replaced Japan as the second leading national economy behind the United States or soon will. What's not clear is what this is going to mean for the rest of us.
Now, the hope would be that China becomes a more responsible player in the world, more cooperative, a real global leader. But I think one of the things we've seen is that the Chinese still have a tendency to go on alone, to look inward. We saw this at the Copenhagen Conference on climate change, a reluctance to take a real leadership role there. It seems the Chinese are still very determined to defend their own economic and political interests, so China's rise could lead to some new conflicts.
SHAPIRO: Well, how do you see this storyline with China unfolding as 2010 progresses?
GJELTEN: We're likely, Ari, to see problems around trade. We just saw this week the enactment of new duties on imports of subsidized steel from China. Before that, there were new trade duties on tires. Another issue is the exchange rate. There's a feeling the Chinese are keeping the value of their currency low in order to keep their exports cheap, so their economy grows. That just makes it harder for the rest of us to compete with them.
It seems like a rather selfish position on China's part. It does not win China any friends in the U.S. Congress and it means there could be pressure in Congress to take a harder line in policy towards China. This year there could be more economic tensions. And, by the way, Ari, Brazil is in a similar position. Another rapidly growing economy and there also we're seeing a more nationalistic element with respect, in that case, to Brazil's protection of its energy resources.
So, as this crisis shakes out, the world's geopolitical landscape is changing. We're seeing countries more ready to challenge the United States and other western countries.
SHAPIRO: Well, apart from the China and Brazil challenges that you've described, what other kinds of new problems do you see the U.S. facing on the security front as a result of this economic crisis?
GJELTEN: The big issues out there right now, Ari, is what's called sovereign debt. This is debt held by governments. Last year, you know, we were worried about risky loans that had been made to private companies or institutions and how many of those loans would go bad. This year, the worry is that government debt could go bad. We've seen warning signs from Dubai, from Greece, other countries on the fringe of Europe, Portugal, Spain, Italy, even Britain have ran up big deficits.
In fact, if there have been losers in this crisis, these would be the countries on the fringe of Europe. The concern is whether these countries will be able to continue to borrow what they need. Will banks have to put aside more reserves to offset the riskiness of those government bonds or loans? That could dry up credit for private lending that would be a problem.
SHAPIRO: Well, Tom, can you give us any good news?
GJELTEN: The good news, Ari, is that the Great Recession of 2008 did not become another Great Depression, as you say. Governments more or less got it together this year, did the right thing to keep the situation from getting worse, coordinated stimulus programs, got credit flowing again and, for the most part, avoided protectionism. Those were the lessons of the Great Depression and generally we seem to have learned them.
SHAPIRO: That's NPR's Tom Gjelten with a snapshot of economics and security in the New Year. Thanks a lot.
GJELTEN: Thank you, Ari.