Is the U.S. on the Verge of Becoming a Banana Republic?
Doomsayers say minting a $1 trillion coin or defaulting on debt would do it. But it all depends how you define "banana republic."
There's a fruity phrase on many pundits' lips these days, and it has nothing to do with high-quality sweaters and slacks. Henry Blodget wants to know if the United States has become a banana republic. Ezra Klein thinks we probably are: "The fact that we wish we were not a banana republic witnessing a full-blown meltdown of our treasured system of governance does not mean we are not, in fact, a banana republic witnessing a full-blown meltdown of our treasured system of governance." The foreign press agrees, and so does Andrew Sullivan. Neil Irwin isn't ready to say so yet, but he thinks that minting a $1 trillion platinum coin might do it.
So are they right? Well, it depends how you define the term. So let's go back to the beginning. The term might not exist at all if William Sydney Porter hadn't been a drunk, a gambler, and an embezzler. Porter was better known by his pen name: O. Henry, the pioneering late-19th-century short-story writer. You probably read his "The Gift of the Magi" -- the heartbreaking story about a couple who each sell their most prized possessions to buy the other a Christmas gift -- in middle-school English class.
In the 1890s, Henry fled to Honduras to escape embezzlement charges. In 1904, after returning, Henry published a book called Cabbages and Kings, in which he wrote about a nation called Anchuria, based on Honduras, and described it as a "banana republic," after the single product upon which its entire economic output depended. A phrase was coined.
In time, the term came to describe any Central American nation whose economy depended on bananas. It took on darker connotations of economic imperialism with the rise of United Fruit Company, an American agricultural giant that viciously exploited workers, aroused the ire of left-wing parties across Central America, and was reportedly involved in various U.S. government interventions that propped up right-wing, anti-Communist regimes. More broadly, the term "banana republic" is often used to describe any nation that relies heavily upon natural resources and agriculture -- what economists call the primary sector -- to prop up its economy.
But the U.S. doesn't meet any of these definitions. Domestic banana production is extremely low; our government is not dominated by a major overseas corporation; and the U.S. economy is actually heavily biased toward the tertiary, or service, sector of the economy.
Now, this is perhaps too stringent a definition. What Klein et al. probably mean is that the threat of a sovereign default, which would be the likely result of a failure to raise the debt ceiling, is the sort of thing that happens in a banana republic. Is that fair? Here's a list of the top banana exporters as of 2005, via the UN's Food and Agriculture Organization:
Of those countries, since 1990, Ecuador defaulted in 2000 and 2008; Cote d'Ivoire in 2000; Cameroon in 2004; and Brazil in 1990.
So really, it's pretty unfair to suggest that failure to raise the debt ceiling would make the United States a banana republic. Most banana republics have their affairs in much better order than that.