Obama's huge challenges

This article was published in the Yorkshire Post
"The party's over... and now Obama's greatest global challenges will begin"

22 January 2009

And the hoopla is over. The partying stops in Washington. Work gets underway. Barack Hussein Obama's 100 days has begun. Never has so much hope been invested in one leader. Can he deliver?
It seems almost indecent to place all the responsibility for solving the world's problems on President Obama's slim shoulders. He entered office as the world's paramount leader at a moment of historic transition. The 30-year era of post-war welfare state nation-based closed economies was followed by the 30-year era of Thatcher-Reagan deregulated, uncontrolled, globalised capitalism. There is little point in being nostalgic about the changes of history. But there can be no doubt that the world now stands at the beginning of a new political-economic-cultural era. Obama – as a mixed-race Kenyan-American with an African-American wife, the Muslim name, Hussein, and a life of work with the poor communities in Chicago – is a symbol of this new era. The Left may wish for a return to some earlier era in which unions determined wages without reference to the real economy. Conservatives may bleat about the need to slash public jobs and, in Britain, try to pin the blame on Gordon Brown when, in truth, every economy in the world is hurting as the failures of an entire system of finance capitalism, divorced from manufacturing and the real needs of most people, come to a hubristic end. But both the Left and the Right are wrong. We need a new system of governance at national and supra-national level. Can Obama deliver this? Here are some of the decisions he has to take. The most important is to restore confidence in the banking system. The Homeric cupidity and stupidity of the world's bankers has brought America, Europe, and the Asian economies to the edge of the abyss. But we need banks. Just as we need to assume that clean water will flow when we turn on a tap, so, too, we need banks that can deliver money to individual and corporate customers. The banks are gummed up, as liquidity needs confidence that all can borrow from all, and, over time, pay back both capital and interest. So the most important first step for the new president is to guarantee that the US government will spend what it takes. As in the Second World War when the US Treasury allowed borrowing to rise to half the value of the American economy, Obama has to be bold and discard the ideology that has produced the present crisis.Everyone knows of Roosevelt's famous line: "All we have to fear is fear itself." But he also famously said that "a rising tide lifts all boats". Obama should ignore those who want to punish the banks and the financial sector and, instead, work out how to get economic growth going again to lift up all of America and, by extension, much of the rest of the world, by raising the level of liquidity in the system. In the closed economies of the 1930s, this required Roosevelt to undertake key banking and investment regulatory reforms as well as adopt Keynsian models of increased government spending. In today's world economy, Keynsianism in one country is not enough. This is the essential point that Gordon Brown understands, which is why he spends so much time travelling in Europe, to oil-rich, cash-a-plenty Arab nations as well as talking to American and Chinese leaders. On Day 70 of Obama's presidency, he comes to London for a G20 gathering which will be the supreme test of whether the world's bigger nations can rise to the challenge of global co-ordination and co-operation. Unlike Roosevelt's America in the 1930s, which remained largely isolationist, Obama has the worst geo-political scenario of any incoming president in history. The conflict in Gaza and the attacks on Mumbai are a foretaste of the determination of Islamist ideologues to win power to impose their agenda of Jew-hate, women-hate, gay-hate, democracy-hate, and replace the carefully constructed culture of law and separation of power by the rules of sharia, jihad and the values of the Taliban. Western politicians have not invested time in reading the core ideological texts of this new movement. It has nothing to do with the faith of Islam, which, like other faiths, deserves respect and protection. But Obama will have to find a response to those who believe that killing innocent people promotes their ideology. In 2001, when George W Bush took office, American troops were not engaged in real-time fighting anywhere in the world. Today, Obama has his own war in Afghanistan. He is right to stress the need for a foreign policy not based on the Cheney-Rumsfeld syndrome of military power. But the peace was held in Europe after 1945 – or imposed on the Balkans a decade ago – by the use of military power. Obama should seek to replace war-war by jaw-jaw, but he needs others to work with him as well. He should offer diplomatic recognition to Iran and lift the trade embargo on Cuba. He should make clear that Israel has to pull back to 1967 borders and maintain his line that there is no solution to the India-Pakistan-Afghanistan imbroglio unless India talks to Pakistan about Kashmir. Obama has made clear that he wants help, not just advice from Europe. This means, as Defence Secretary John Hutton made clear in the Commons last week, that Europeans should send more men to fight, and not just sit in barracks in Afghanistan. Can the new President also turn America green? An injunction to US car-makers to produce cars that do not emit CO2 would be a giant step in changing the world's assault on the environment. It would force Mercedes and BMW and Jaguar to make very different cars if they wanted to have sales in the US. In short, President Obama in his first 100 days, or even a potential eight years in the White House, has to both turn around America, and also create new partnerships in the world. His appeal to Europe and Asia and Africa should be: "Ask not what America can do for you but rather ask what you, with America, can do for yourselves." The response of Europe and the rest of the world will determine whether the Obama presidency is a success, or the generalised world crisis gets worse and more violent, with extreme solutions proposed and then implemented.