History teaches that, in times of crisis, ingrained prejudices can, by themselves, make all the difference between success and ruin.

In the Second World War, Hitler’s assessment of the US as a “Jew-led, mongrelized” nation led him to scant both American resolve and American power — until the Marines arrived on the beaches of Normandy.

A few years later, racist assumptions of superiority on the part of American officers facing a ‘ragtag’ army of barefooted, pyjama-clad, ‘slant-eyed’ North Koreans led them, time and again, to engage in what they saw as hot pursuit of fleeing natives — into what were in fact prepared ambushes. Tens of thousands of GI Joes lost their lives for such racism.

The political caution which served Obama well in the campaign may now be his Achilles heel.
The political caution which served Obama well in the campaign may now be his Achilles heel.

The prejudice in question needn’t be ethnic; it may be ideological. And it turns out that, in the Land of the Free, a kneejerk national revulsion to concepts like ‘nationalization’ and ‘Europeanization’ may well wind up crippling the great US economy, and by extension much of the rest of the world.

Barack Obama has many admirable qualities, but in the current economic crisis the political caution that served him well in the campaign may be his Achilles’ heel. The problem was always going to be less about getting passage of his stimulus package — never mind how hard he had to work for it in the end, nor the extent to which he began by weakening it with huge and relatively unproductive tax cuts in the naïve hope of enticing Republican lawmakers into a bipartisan consensus.

The real problem was always going to be the banking community: that club of elitists with the collective social conscience of a sirocco, habituated to their spoilt-child status by 30 years of Reaganomics. It’s not that these types rushed to pay themselves multi-million-dollar bonuses just days before petitioning the government for billions of taxpayers’ dollars to rescue their collapsing firms. It’s that they did so without feeling the least guilt; with, to the contrary, unambivalent pleasure at having once again gamed the system.

As a class, these people are sociopaths in suits: word soon got out that they’d deployed the first hundreds of billions gifted them in September by Mr Bush, not to free up credit or ease the home foreclosure disaster, but to bolster their firms’ financial positions and avail themselves personally of such luxuries as new corporate jets and million-dollar office redecorations.

Not surprisingly, the news incurred the wrath of Americans economically stressed or worse by the current deep recession — this, to the point that even the Democratic-led Congress, notable for its spinelessness, last week felt emboldened enough to summon the heads of leading US banks and subject them to a macho, public dressing down.

On Friday, a Yahoo analysis disclosed that “One reason [home] foreclosures are so rampant is that banks and their advocates in Washington have delayed, diluted, and obstructed attempts to address the problem. Industry lobbyists are still at it today, working overtime to whittle down legislation backed by President Obama that would give bankruptcy courts the authority to shrink mortgage debt.”

And on Friday, too, it was reported that Obama’s new director of national intelligence had, the day before, told Congress that “global economic turmoil and the instability it could ignite had outpaced terrorism as the most urgent threat facing the United States.”

That is a measure of the depth and breadth of the crisis.Then, why doesn’t the Obama administration do the obvious: temporarily nationalize these collapsing banks and make sure that most of the trillion-odd dollars that Treasury Secretary Geithner last week promised to inject into the financial system (they’ll have to print that money) gets to the people who most desperately need help, home owners, small businesses, cash-strapped consumers, instead of winding up paying for more bank executives’ ‘retreats’ to Las Vegas?

The answer lies quite simply in the word ‘nationalization.’ Americans, it’s feared, would rise up with a great roar of rage if such a gambit were essayed to help them. To most Americans, nationalization means something between communism and Europeanization (another epithet, this one especially bewildering to third parties with experience of both countries). Americans, the fear is, would rather go homeless than go there.

Even “the rhetorical response of conservatives to the stimulus plan,” observed the NYT’s Nobel-winning economist Paul Krugman, “which will cost substantially less than either the Bush administration’s $2 trillion in tax cuts or the $1 trillion and counting spent in Iraq, has bordered on the deranged. It’s ‘generational theft,’ said Senator John McCain, just a few days after voting for tax cuts that would, over the next decade, have cost about four times as much. ‘It is like sitting there watching my house ransacked by a gang of thugs,’ said Arnold Kling of the Cato Institute.”

Andrew Sullivan, the iconoclastic British-born US journalist and blogger, was outraged. “This much is now clear,” he wrote scathingly. “[The Republicans’] clear and open intent is to do all they can, however they can, to sabotage the new administration (and the economy to boot). They want failure. Even now. Even after the last eight years. Even in a recession as steeply dangerous as this one. There are legitimate debates to be had; and then there is the cynicism and surrealism of total political war. We now should have even less doubt about what kind of people they are. And the mountain of partisan vitriol Obama will have to climb every day of the next four or eight years.”

Concludes Krugman (who thinks the $800 billion dollar stimulus package too small): ‘I don’t know about you, but I’ve got a sick feeling in the pit of my stomach — a feeling that America just isn’t rising to the greatest economic challenge in 70 years. The best may not lack all conviction, but they seem alarmingly willing to settle for half-measures. And the worst are, as ever, full of passionate intensity, oblivious to the grotesque failure of their doctrine in practice.”

Nationalize the failed banks and deploy their bailout money in ways that are both socially responsible and economically productive? Not in America, friend.

For this mindless fetish, you, I, and much of the rest of the world are going to pay.

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