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Illusions & reality
BARACK OBAMA WON a sweeping victory on 5 November.
The first black minority president won a decisive majority of the
popular vote. At the same time, the Democrats now have a commanding
majority in Congress. This was a massive vote for change, an angry
rejection of the Bush regime. Opposition to the war in Iraq merged with
even stronger rejection of disastrous, ultra-free-market policies.
Emblazoning a message of hope and change, Obama has
aroused great expectations.
Obama will assume the presidency in January with a
huge fund of political credit (unlike Bush in 2004) at home and abroad.
He will undoubtedly enjoy a honeymoon period. But Obama will immediately
be put to the test. He will have to grapple with the worst economic
crisis since the 1930s. At the same time, US imperialism faces the most
volatile and dangerous international situation since the second world
war.
Even as they celebrated his victory, Obama and his
advisers were beginning "an effort to reduce… unusually high
expectations among his supporters… While the energy of his supporters
could be a tremendous asset as Obama works to enact his agenda… his
aides said they wanted to temper hopes that he would be able quickly and
easily to solve the country’s overarching problems or fully reverse the
policies of president George W Bush, especially given the sagging
economy". (Tamping Down Expectations, International Herald Tribune, 7
November)
When he takes over in January, Obama is likely to
announce immediate measures which will mark a change from the Bush
regime. The Guantánamo prison camp is likely to be closed. There may
well be measures to limit foreclosures and protect jobs in the vehicle
industry. Some of Bush’s last minute executive orders will be reversed.
But what course will Obama follow on key economic and foreign policy
issues?
Obama’s economic policy
IN HIS CAMPAIGN speeches, Obama empathised with all
those who are facing foreclosure, the loss of their jobs, or the lack of
healthcare. John McCain, associated with the ultra-free-market policies
of the Bush regime, was an easy target. Obama promised to tackle the
problems facing working families. But, as on other issues, Obama’s
policy proposals were either very limited or extremely vague.
He promised a $150 billion spending programme on
energy-saving and green job creation – over ten years. He also proposed
spending $60 billion on infrastructure, repairing roads, bridges,
schools, and so on – over ten years. But given the depths of the current
downturn, spending on this scale would have only a very limited effect.
Obama also proposed tax credits ($4,000 a year for college tuition,
$3,000 for childcare, and $7,000 for purchasing clean cars). Taxes would
be increased for those earning over $250,000 a year, and reduced for the
majority of wage earners.
Obama promised action to prevent foreclosures, but
has so far not come up with detailed measures. He proposes state
subsidies for health insurance payments, though this would retain a
basically private healthcare system.
These policies, however, have been overtaken by the
unprecedented crisis now facing US and global capitalism. The global
banking/credit system is paralysed and the global economy is sliding
into a deep recession. Obama’s team has indicated support for a further
$60 billion stimulus package to be passed by the lame duck session of
Congress. However, Bush and Republican legislators, who favour tax cuts
rather than spending on food support for the unemployed and the
extension of unemployment benefits, are not likely to accept such a
package. Substantial measures, therefore, may have to wait until Obama’s
inauguration in January.
Many of Obama’s campaign promises will inevitably be
postponed. Of dire necessity, his main priority will be to stave off a
deep and possibly prolonged economic downturn, a new ‘depression’. Just
as Bush (through treasury secretary, Hank Paulson, and Ben Bernanke,
chair of the Federal Reserve) was forced to abandon neo-liberal policies
and step in to nationalise or partially nationalise failing banks and
financial institutions, Obama will be forced to intervene to prevent the
collapse of major sections of the economy (notably, the auto industry).
Some commentators have noted that Obama’s economic
advisers include Lawrence Summers and Robert Rubin, both former treasury
secretaries under Bill Clinton. Undoubtedly, they energetically promoted
the acceleration of deregulation and globalisation. This has led some
liberal Democrats to lament that Obama’s economic policies will be ‘more
of the same’, a continuation of the Clintonomics that paved the way for
Bush’s policies.
But the economic position has completely and utterly
changed. The deep crisis of US capitalism will push Obama further in the
direction of state intervention, perhaps on a massive scale. Recently,
both Summers (in a series of Financial Times articles) and Rubin have
advocated Keynesian-type stimulus packages by the federal government.
They remain strategists of big capital. But the situation has changed
since Clinton, and they are now compelled to change their policies.
On the eve of the election, Rubin co-authored an
article with Jared Bernstein, the head of the liberal Democrat
(neo-Keynesian) Economic Policy Institute (New York Times, 3 November).
Rejecting a false dichotomy between "fiscal rectitude versus stimulus
and public investment", they declared: "There’s a time to spend, a time
to save; a time to build deficits up and a time to tear them down". They
continued: "With the current financial crisis, our joint view is that
for the short term, our economy needs a large fiscal stimulus that
generates substantial economic demand". The US economy requires "public
investment in critical areas like education, healthcare, energy, worker
training and much else".
The limits of Keynesianism
RUBIN AND BERNSTEIN do not quantify the size of any
such stimulus. But to be effective, it would have to be much bigger than
anything so far proposed by Obama. Nouriel Roubini (who accurately
predicted the scale of the banking crisis) advocates a stimulus of about
$300 billion. Paul Krugman, a pro-Obama economist, estimates that to be
effective the stimulus would have to be in the region of $600 billion.
These are colossal sums which would push the federal deficit up to
wartime heights.
How far Obama will go in the direction of state
intervention is hard to predict. But would such huge stimulus packages
overcome the crisis in US capitalism, which is part of a global crisis?
Huge spending packages would undoubtedly mitigate
the immediate effects of crisis, sustaining a certain level of consumer
spending and cushioning unemployment. Initially, such stimulus packages
would have to be financed by additional government borrowing or printing
money. In practice, borrowing would depend on the willingness of foreign
investors to buy US government bonds, which will not be unlimited.
Printing money, on the other hand, would open the door to soaring
inflation. At a certain point, big business in the US would demand a
drastic reduction of the deficit, which would mean a combination of cuts
in spending and higher taxes. Moreover, while a stimulus package can
give a short-term boost to growth, a sustained recovery of a capitalist
economy will depend on the restoration of profitability for the
capitalist class.
We should be prepared for a turn in the economic
policy of US capitalism. Any measures by Obama that preserve jobs,
increase welfare expenditure, and create new energy-saving employment,
will be popular among wide layers of people. Keynesian-type state
intervention by the federal government – combined with similar measures
by major capitalist governments internationally – may at least establish
a bottom for the downturn, allowing for a subsequent recovery. While
preventing a catastrophic collapse (comparable with the 1929-33 US
depression), state measures will not prevent massive unemployment,
homelessness and poverty. Any recovery is likely to be slow and feeble
as far as workers are concerned.
Whatever the short-term effects of state
intervention, even a colossal stimulus package will not overcome the
underlying crisis of capitalism, the weakness of investment in new
productive forces, and the chronic crisis in profitability.
Fundamentally, state intervention will be aimed at saving capitalism,
not transforming society. The preservation of the capitalist order will
be the prime objective. Any benefits to workers will be secondary.
The hopes now invested in Obama will be quickly
tested and, as events unfold, there will be disillusionment with a
president who ultimately represents a big-business party and corporate
interests. The unfolding crisis will provoke huge struggles in US
society. The workers, young people, and minorities who have voted for
Obama for lack of an alternative will increasingly recognise the need
for ideas, policies and democratic organisations that represent the
interests of the working class.
Foreign policy
OBAMA’S VICTORY HAS aroused huge expectations
internationally, as in the US itself. His victory was celebrated with
mass enthusiasm in many countries and on many continents. This is partly
because of the contrast to Bush, partly enthusiasm for an apparently
liberal, black leader with some experience of the wider world.
Capitalist leaders, both of major powers and smaller
states, believe that Obama will be more sympathetic to their interests
and problems. His presidency, they think, will restore some of the ‘soft
power’ – diplomacy, cultural influence, etc – destroyed by Bush’s policy
of pre-emptive military intervention. (Bush himself, with Condoleezza
Rice taking the lead in his second term, was forced to turn more to
diplomacy, but was already irrevocably discredited by the intervention
in Iraq and elsewhere.)
Obama’s authority, however, will rapidly be put to
the test. Apart from Franklin D Roosevelt during the second world war,
it is hard to think of a US president who has faced such an array of
intractable problems internationally.
During his campaign, Obama promised that the US
would withdraw from Iraq within 16 months. This withdrawal, however,
applies to combat troops, and other US forces will be left to train
Iraqi forces and provide security. "Some military officers", comments
The Financial Times (5 November), "privately argue that he will show
more flexibility on timing after assuming responsibility for the war
started by George W Bush". Moreover, the growing tensions between the
three main elements in Iraqi society, the Shia majority forces, the
Sunni minority, and the Kurds, could result in withdrawing US forces
fighting a rearguard action on three fronts.
Moreover, Obama has pledged to increase combat
forces in Afghanistan. Even general David Petraeus, director of the
‘surge’ in Iraq, admits that the insurgency in Afghanistan is far more
complex and difficult. By escalating the war in Afghanistan, Obama is
plunging deeper into an even worse quagmire for US imperialism. Already
his support for US military intervention in the Pakistan border regions
has made him very unpopular in Pakistan.
On Iran, Obama has said that he would not be
"hell-bent on regime change, just for the sake of regime change". But,
at the same time, he said that the US would "expect changes in behaviour
and there are both carrots and there are sticks available to them for
those changes in behaviour". Clearly, behind this ambiguity, there is
still the threat of the possible use of military force against the
Iranian regime.
Within hours of Obama’s victory, the Russian
president, Dmitry Medvedev, announced that Russia would site missiles in
Kaliningrad to counter any US missiles based in Poland, etc – unless the
US abandoned its missile defence system. Obama, however, has stated that
he supports the deployment of the anti-missile missiles – provided they
are proved effective (which is by no means certain).
Obama faces a whole array of international problems
which will not be easily resolved by diplomacy alone. On the contrary,
sudden events such as the Georgia-Russia conflict will produce further
international crises.
One of Obama’s foreign policy advisers, Strobe
Talbott, told the media: "You are going to have an administration that
is committed to traditional American internationalism, to something that
has been missing for the past eight years". Yet, as the example of
Obama’s predecessors, Woodrow Wilson, Roosevelt and John F Kennedy,
shows, there has always been a gulf between rhetoric and actual
policies. "None of those great ‘internationalist’ statesmen", comments
the historian Paul Kennedy, "did anything other than pursue America’s
‘national’ interests". (The Return of Soft Power? International Herald
Tribune, 14 November)
Soft power has always been used in conjunction with
economic power and military might. In the first period of his
presidency, Obama will undoubtedly have a great fund of goodwill to draw
on internationally. He may well be a more intelligent, flexible
representative of US imperialism than his predecessor. But, ultimately,
he will be the representative of US imperialism, and will not hesitate
to use its economic power and military force to safeguard its interests.
US imperialism has been weakened by the economic
crisis and military overstretch – but it remains the world’s paramount
power and will not hesitate, when threatened, to ruthlessly intervene to
defend its interests. Despite his charisma, Obama will not be able to
prevent the eruption of explosive conflicts that are rooted in the
global crisis of imperialism.
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