Obama-esque?

I started to write this column in my head on Nov 4 as I watched the election results refreshing ‘live’ on my computer screen. I grew giddy with quiet delight: At long last change has finally come to America, I thought then.

More than a month later, after digesting Obama-mania, I am now asking: Has it? Will change come to America? Sitting in my apartment in New York City, the view looks different, suddenly.

No doubt Barack Obama's election win will go down in the history of the world, let alone the history of America, as the day - and I told a friend this - the whole world became black-American. A day we should all be proud.

For never in living memory did any of us think we would ever see an Afro-American, the son whose roots are nestled deep in the soul of black-American slavery, become the president of the United States of America. Barack Hussein Obama: the 44th President of the United States of America.

In a Gettysburg-like speech, Obama’s victory offers the world new hope.

Perhaps I was getting carried away with the moment, but who cares. This is precisely the kind of change that ought to sweep through so many nations, especially in the developing world, where change has not been possible. Where if change does come, it is always, inevitably, the wrong kind.

Where old politics become renewed as old politics - bedeviled as the politics of hatred, greed, corruption, hunger, injustice, ethno-religious killings, diehard nationalist and outright ethnic racism. These are the politics of intransigence, cowardice and a serious lack of imagination of ancient regimes.

Which brings to mind the conservative John Howard, devout George W Bush supporter and former Australian Prime Minister, who said in February 2007 that a victory for the Democrat senator Obama in this year’s presidential election would be a victory for Islamic terrorists.

"If I were running al-Qaeda in Iraq," Howard said, "I would put a circle around March 2008, and pray, as many times as possible, for a victory not only for Obama, but also for the Democrats."

Howard’s beliefs are well known, and so his remark shouldn’t surprise. But how sweet it is that Howard was as roundly swept from office - in the same way that Obama has swept from the White House, the fundamentalist and warmongering Republicans, led by Bush.

Sooner or later, but hopefully sooner rather than later, Obama-mania will die down to the dull realities of the world. And I think it has already. Even as President-Elect - and Jan 20, 2009, the day of his inauguration as President, seems a while away - Obama has already hit the ground running.

There may not even be a moment for honeymoon canoodles. It’s too early, and too dumb, to even contemplate now the kind of legacy Obama will leave us after his first or even second term as president.

But we know it’ll be much more than Bush’s (or Howard’s or former British Prime Minister, Tony Blair’s). Most importantly, Obama is clear of the policy challenges that lie ahead.

There are still two wars - in Iraq and Afghanistan, against terrorists, against whom the US-led coalition has been losing every day since November 2002; the financial crisis that was sparked off by the shenanigans of American banking and non-banking executives over lending and borrowing practices - a crisis that has enveloped the world, set it on fire, and now we’re left on the brink of the worst economic crisis since the 1930s Great Depression; and a foreign policy - economic and political - that Bush and his merry brotherhood in the White House, the Department of State and in pro-Republican conservative think-tanks and media have messed about so badly that few, if anyone, especially the Europeans, have been dealing with in farcical frustration.

In fact, the Europeans may well have genuine partners to Obama - if they can convince him to pull out of Afghanistan and Iraq gradually and find new diplomatic initiatives toward the Middle East that are unlike the hawkish policies of the Bush-ites.

But these policies must couple, not decouple, the potential to deal with terrorism in ways that’ll see jihadists return home rather than continue to be succored by their sponsors in Iran, Syria and the Saudi Wahabists. Even Hamas in Palestine sees Obama’s election favourably. It has already flagged that it’s ready to talk with the Obama administration.

Problems may arise, however, if Obama agrees to a gradual withdrawal from Iraq - and he will - but then asks the Europeans to beef up their troop numbers in Afghanistan. I’d hazard a guess that even Obama understands that the problem of terrorism has quite a lot to do with decades of prejudicial US policy towards the Middle East and the bedeviling of Islam.

But Afghanistan is a lost cause. Fullstop. Every day President Hamid Karzai loses Afghanistan inch by inch to the Taliban.

But Obama’s first noise has been problems at home - an economy that’s collapsing around his knees. Forget China and all the hype that has been appended to it as being the greatest economy in the world and which will ultimately become the world's saviour.

It’s utter nonsense. Worse, it's a massive perpetration of outright lies by China apologists. Just watch the Chinese economy slow - and slow rapidly. And watch its scurrilous financial sector wobble to the point that Beijing will pour money into more and more insolvent Chinese banks and affiliated financial institutions in the same way the West has its own.

Even the so-called miracle economy in Australia is languishing when Australians were told just weeks ago that the resilience of their economy was unlike any other and that the global financial crunch would not affect it much, if at all. Bah, humbug.

They were just populist spin by the Labour government of Kevin Rudd. The US economy is the world’s mainstay. It has been and it’ll always be the world’s biggest and most important economy.

Obama is quickly coming to understand that what the American economy needs now is a massive injection of capital. We were always told that American businesses are the best run companies with the best, most competent entrepreneurs in an environment made completely conducive to growing profits and rising prosperity through free markets. Well, where are free markets now?

The job ahead for Obama is a strikingly onerous one. He has to save the US financial system from meltdown, and it remains close to meltdown despite bailing out some key financial institutions and burying others, like Lehman Bros. Even Morgan Stanley came so close to annihilation.

And Wall Street traders whose emotions run from the ridiculous thumbs-up glee when the stock market is up, to manic depression when it tanks like the Titanic, are not true students of economics but of the mindless humbug found in Economics 101 textbooks that indoctrinate students with the ridiculous virtues of free markets as though these are unquestionable sermons of a religion.

It’s clear now, for all the shenanigans, that the so-called free markets must be governed and that means, like it or not, more, not less, regulation. We went far too far, and too stupidly, with deregulating markets. Free markets cannot be trusted. But here’s the thing: neither can governments.

Paul Krugman, professor of economics at the ivy-league Massachusetts Institute of Technology, columnist of the revered New York Times and more recently Nobel Prize winner for economics, argues that Obama should not be afraid to run the US budget deficit into deficit.

He says that in a depressed economy, such as the US and soon the world’s, governments should spend, spend, spend to put a floor under the real economy, boost production, save jobs and all the rest of it. It makes sense - at least insofar as basic economics go.

But the US economy has been, at least since 1965, a deficit economy that has been pump-primed first by the likes of post-war Japan and Germany and then Opec petrodollars. More recently, sovereign funds from the Middle East and elsewhere have bailed out economies and firms in the west.

But let’s face it: At the end of the day, deficit financing comes with a hefty price, and that price is borne by ordinary men, women and children.

But Bush, like Ronald Reagan, were all acting in the Cold War context when manufacturing their economic policies. The rest of the world needed the United States as its ally to provide a security blanket in their respective parts of the world and the every US government, including Bill Clinton’s, happily extracted from its allies monies to pump-prime the US economy, to which these economies were heavily geared in terms of their exports.

Every US administration ran a protection racket and extracted rents from its allies. The problem is that the prosperity that Americans have enjoyed for decades, the very prosperity about which Obama talked so effusively in his election victory speech, is laced with a problem. That prosperity was an illusion, and the policies that the previous governments had run, and which the Bush administration has been running, were and are delusional.

Budget deficits are debts. Like all debt, it’s the people who pay a price for the stupidity of policies that are made with political calculus, not the economic calculus, underscored with the fallaciousness of ideology that is as putrid as a pig and as dumb as an ass. To finance deficits, taxes will have to rise. So will prices of goods and services.

Testing Obama's audacity of hope

So, what will Obama’s ‘audacity of hope’ tell him when he sits down to frame his economic, foreign (including military) and social policies - with a view to the world too? There’s a terrible dollar crisis, with the likes of China and Japan already hoarding the bulk of their foreign reserves in US dollars.

Any talk, or even a hint, by them to diversify their holdings, as former Japanese premier Junichiro Koizumi did in 2005, will only add to world panic and the dumping of US dollars. That’s simple supply and demand, but with a crazy herd psychology that’ll batter confidence in the US economy in terms of foreign investments and consumer spending.

And if new money inflows from abroad rise above the level of the production of goods, you’ll entertain the specter of hyperinflation not dissimilar to that which Argentina experienced in 1989, and all that ordinary Americans will be left with will be a "banana republic".

What on earth will the Chinese and the Indians, the Asians and the Japanese do then: Scour economics textbooks for solutions?

Krugman is right that Obama needs to manufacture a Roosevelt-like New Deal. Ordinary people facing personal economic strife ought to be helped first - not the filthy rich and self-interested entrepreneurs who operate on greed as good economics.

Krugman is right again: It’s plainly bad morals by these people. But I can’t help wondering if Krugman’s promotion of deficit spending is right for America now. The problems are so complex that it’s not possible for us to write whole economic opuses here. To spend your way out of trouble is to incur inflationary pressures that will in turn force up interest rates. We're back to square one.

But I am sure, given time, even Krugman, and Obama, will know that the new president’s audacity of hope will be sorely tested by ordinary and not-so ordinary Americans and the rest of the world that has hitched its wagons to the US economy instead of diversifying.

Point is, when it comes to policymakers, they’re not so clever after all. But neither are most entrepreneurs, regardless of the fact that they may hold Harvard MBAs.

We do not need the intransigence of old. We need new imagination for problems writ so large that sometimes it is so difficult to imagine how so dire these problems have become, let alone to resolve them. It’ll take time.

Only, not many people - "young and old, rich and poor, Democrat and Republican, black, white, Hispanic, Asian, Native American, gay, straight, disabled and not disabled" - have that much time.

Certainly not another 221 years. These Americans, like so many others around the world, have dreams too. In his victory speech Obama said "change has come to America". Indeed, change must come to America. It hasn’t yet.