As he initiated his campaigning to get from his Senate seat to the Oval Office two or so years ago, preaching the gospel of change, President Obama could hardly have imagined that the domestic environment in which he would assume office would be so severe. Certainly, while he was insisting that the United States needed to increase the pace of its economic reorganization to meet challenges from the new emerging economic powers, China in particular, he never went as far as portraying his country as being in danger of falling into the persistently deepening recession that exists today.
The United States, after a relatively long period of post World War II expansion up to 1973, fell into recession during the administration of President Nixon, with the President having to take the historic decision of delinking the dollar from gold, and to cope with the phenomenon of stagflation − the simultaneous occurrence in the economy of recession and inflation. Then in 1981-2, as President Reagan assumed office, the country went into recession again, but this was followed by his new economic policy of liberalization and deregulation which seemed to produce a relatively rapid recovery. But by the end of Reagan’s period of office, President Clinton was having to give another stimulus to the economy to inhibit it from going into relative decline again. The Clinton recovery, following the policies of liberalization, continued through much of the Bush period, conventionally defined as a ‘hands off’ era, emphasizing the Reagan philosophy of letting market forces reign.
It is this policy which has now come to a bump, leaving President Obama to find new ways of dealing with the current recession, which some fear can turn into a depression. On the other hand, however, the Congressional Budget Office, in its review of the United States Economic Outlook for 2009 and after, presented to Congress in January, takes the view that the while this present recession will be the longest since the Second World War, it should end in 2009, though “the recovery in 2010 will be slow.”
In a sense, President Obama, in his inaugural address, reflected the view of recurring crises of the American economy as he observed that, “Every so often, the oath is taken amidst gathering clouds and raging storms… That we are in the midst of crisis is now well understood… Our country is badly weakened…” Of course, by that time, President Bush had had to take extraordinary measures to seek to “bail out” major banks and financial institutions from imminent bankruptcy. But what will have surprised many observers, including the incoming President, was that the measures seemed to have minimal effect in staunching the collapse of other similar institutions. They were therefore being forced to face the fact that there was not only a limited financial crisis, but a crisis of confidence in the capacity of the financial system to sustain itself, and therefore a crisis of the economy as a whole.
Little wonder then, that in his inaugural address, President Obama went somewhat on the offensive. For even while insisting that the problems and future development of the country had to be pursued on a collective and cooperative (or as the Americans say, bipartisan) basis, he sought to isolate those deemed guilty of inducing the current failures. “Our economy,” he observed, “is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age.” This statement was widely read by the Republicans as a condemnation of their past stewardship, and it seems to have shaken them from their torpor and sense of weakness after the elections, and induced them not to heed the bipartisanship which the President has sought, but to keep to the traditional partisanship of the two party political system.
The consequence is now clear: that in spite of the fact that the budgetary stimulus legislation that President Obama seeks to have approved was already in train under President Bush, the Republicans, particularly in the Senate have, with a few exceptions, decided to play hardball and oppose it. In some measure their defence rests on the traditional philosophical divide that Reagan had insisted on: supporting the philosophy of letting market forces reign versus the view that the predominance of market forces in a capitalist economy must be complemented by an appropriate role of the state in “priming the economic pump” and ensuring adequate protection of the weak.
So in a sense, political war has been declared by the Republicans, denying the President’s apparent belief that the strength of his victory and his continuing substantial poll support after the election should be recognized as legitimizing his stance of the need for bipartisan support in order (in the words of his inaugural) to “prepare the nation for a new age.” And at the same time, even some Democrats are beginning to question some of the choices that the President has made in respect of the conduct of economic policy. Particular focus has been placed on senior appointments like that of Larry Summers and Robert Rubin, previously recognized as economic czars and stars of the Clinton administration, but Rubin, in particular, being associated with the recent failures of the banking system.
In foreign affairs, the President’s entry into office has taken place contemporaneously with the sustained Israeli military attack on Gaza, with President Bush’s stance indicating to large areas of the non-western world a continuing American pro-Israeli partisanship. Prior to his assuming office, President Obama was conspicuously silent as the conflict proceeded, indicating to all that he understood well the political dangers of not doing anything that would indicate less than bipartisan US support for Israel. It is widely believed that the conflict has worsened the possibilities for a mutually acceptable solution in the Palestine issue, and will divert the President from finding ways of balancing US relations with Israel with a post-Bush approach to coping with relations with Iran. Undoubtedly with his appointment of former Senator George Mitchell (one of the main negotiators in the conclusion the Northern Ireland issue), he had been intending to take a more measured approach to the Palestine issue, but he will certainly find that Mitchell will have to do some preliminary calming of the Middle Eastern waters.
Simultaneously with a concerted concentration on the Palestine issue, the President finds himself facing a situation in Afghanistan not dissimilar to that which Bush found in Iraq as he took over the presidency, and indeed that Kennedy found when he came in: intense pressures to intervene in both Cuba and Vietnam. Once again, a new President is being told that America is being faced with a situation of deterioration and imminent danger in a country deemed important to United States interests. Some critics on the ‘left,’ but not only they, are already expressing concern that Obama may have precipitously committed himself to an increase of American troops in Afghanistan. And their fear is not only that the US may be caught in another quagmire, but that this preoccupation will worsen the prospects of finding pathways towards solutions to problems in an area that stretches over the Middle East through Turkey to the Asian countries that border Russia.
The fear of others, relatively far away from those areas, is that the relationships which they wish to build with the America that the new President wishes to reconstruct, may receive less attention than merited. Already, Europeans (with their sense of the prime significance of the North Atlantic Alliance in international relations) are indicating that they have noticed that not a single mention was made of the European Union in his inaugural address. And no doubt those of us in this part of the hemisphere will be waiting to see what priority is given to issues that fall under the forthcoming Summit of the Americas, and the extent to which changing global economic patterns can be faced by hemispheric countries as a collective that includes a focused United States.