By Yang Sung-chul

An Italian immigrant, who had been shining shoes for 20 years outside New York Grand Central Station, was asked what he had learned. "There is no free lunch in America!" answered the man. I first heard this remark one evening more than 35 years ago, on Alistair Cooke's America.

One of the most humiliating experiences in my entire professional career was the news story in May 1976 that a congressman's mistress was paid $14,000 a year from Congressional payroll, while I was earning $12,000 as an assistant professor at a university in Kentucky.

How do these two episodes connect with the current global financial crisis? It is because hard and productive work, not easy and illicit money, is the key to the present panic. It sounds simple, but it is difficult to put into practice. Printing money endlessly is a syndrome, not a solution.

Alan Greenspan, former chairman of the Federal Reserve Board, is one of the chief culprits - if not legally, then morally at least - of the present global financial meltdown, although he is still obfuscating his role in it. He called the current crisis "once-in-a-century tsunami." He admitted also that this debacle had revealed "a flaw in a lifetime of economic thinking" and left him in "a state of shocked disbelief."

As a layman, my answer to the present panic is rather mundane. Not only is there no free lunch in America, nothing is free in the United States or anywhere else in the world. Nor should it be. I have worked all my adult years and have learned a precious and simple lesson: individuals and collectives, be they companies, conglomerates or countries, must live within, not beyond, their means. Prudence, not prodigality, should rule individual behavior or the conduct of such collectives.

Differently put, an individual, a corporation or a nation can easily fall into a vicious circle of debt if one indulges in the life of living beyond his/her means. Need, not greed; discretion, not deceit and thievery; and proper income, not extortion, must prevail both on Wall Street and Main Street - and in household, company and government coffers, for that matter.

Three concrete examples lend credence to the above maxim.

First, corporate money grabbing has been out of whack. I am appalled by the rampant greed of the corporate world. For example, as of this summer amid the subprime mortgage fiasco, the highest paid chief executive officers in the US were making tens of millions of dollars, topped by John Tran, CEO at Merrill Lynch ($83.8 million), followed by Lloyd Blankfein of Goldman Sacks ($54 million), Kenneth Chenault of American Express ($50.1 million) and John J. Mack of Morgan Stanley ($41 million).

These CEOs may be indispensable, like the legendary golden goose. Still, how can anyone in all conscience make such an irrational and even extortionate sum while the minimum wage in the US is just $6.55 an hour, and average per capita income is less than $45,000?

Second, the US dollar hegemony - first the dollar-gold convertibility from 1945 to 1971 under the Bretton Woods system and next, the dollar-oil arrangement with OPEC from 1971 to use US dollars for all worldwide oil transactions - was being challenged even before the present financial fiasco.

Experts, pundits and policymakers in the US and around the world are demanding drastic reform in the existing Bretton Woods system (the International Bank for Reconstruction and Develpment and the International Monetary Fund), or a new alternative which will reflect and represent the fundamentally transformed global economic and financial landscapes of both developed and developing nations.

I hope that this time around the US-led "currency-swap" is not a scratching-the-surface stopgap measure.

Third, the Bush administration's runaway spending spree, especially on military expenditures, needs to be curbed. The US cannot afford, and the world would not continue to support, his eight years of garrison state-like direction anymore.

Nothing short of F. D. Roosevelt's "New Deal" amid the Great Depression is called for, even before the inauguration of the new US president next January. The groundwork for the new visionary program must start now before it is too late to avert the "tsunami."

The unprecedented US national debt ($10.2 trillion) and current account deficit ($850 billion in 2007) under Bush tell only half the story. The US military budget ($651.2 billion in 2008) alone constitutes more than half of world military expenditures ($1.1 trillion in 2008). Of the total, the cost of the wars in Iraq and Afghanistan in 2008 was $200 billion. Joseph Stiglitz and Linda Bilmore's estimation of the cost of the Iraq and Afghanistan wars is more than $3 trillion, excluding British spending of some $30-35 billion.

Either an individual household or a nation cannot pretend that it is business as usual while its debt is piling up daily. A nation cannot sustain itself indefinitely simply because it is the sole military super power and oil is pegged to its currency. It must restrain consumer spending and runaway deficits and debts and encourage frugal lifestyles and productive work ethics. Where has America's "Protestant ethic" of honesty, frugality, industry and piety gone?

Let me close this piece by illustrating three events during Bush years as harbingers for a new direction in America and beyond. The first is the 9/11 horror, which shocked everyone. But the Bush-led global war on terror is ill-conceived and misdirected. Plainly it has proven to be neither a solution nor a strategy. Besides, might is not right. To the contrary, right is might in the long run.

The next two catastrophes were the August 2005 hurricane Katrina disaster in the Gulf Coast and the August 2007 Minnesota bridge collapse. To be sure, the blame was heaped on the negligence and impotence of the Federal Emergency Management Agency, which worsened one of the most punishing and the costliest hurricanes ever to hit the United States. Likewise, faulty design was reportedly the cause for the interstate 35W bridge collapse in Minneapolis.

Personally, however, I see more fundamental problems associated with these events than the aforesaid surface causes. The 9/11 and these two disasters, not to mention the current global financial meltdown, sternly urge that incoming American leadership must start anew.

Instead of wasting precious human lives and money in foreign military adventure, the policy priority should be redirected to investment in infrastructure projects like roads, bridges and embankments by repairing existing infrastructure and building new ones at home, to protect the nation from the imminent dangers of global warming and to help development abroad, including the abovementioned new alternative to the present Bretton Woods system. In doing so, Bush's foreign and domestic policy fiasco during his term of office should be avoided as "an anti-model" for the new leadership in the US.

The author is former South Korean ambassador to the United States
The Korea Herald/AsiaNews Network

(China Daily November 6, 2008)