Barack Obama won a sweeping victory on November 5.
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, U.S. 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 countrys overarching problems or fully reverse the policies of president George W Bush, especially given the sagging economy (Tamping Down Expectations, International Herald Tribune, November 7).
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 Bushs last minute executive orders will be reversed. But what course will Obama follow on key economic and foreign policy issues?
Obamas economic policy
In his campaign, Obama empathized 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, Obamas policy proposals were either very limited or extremely vague.
He promised a $150 billion spending program 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 U.S. and global capitalism. The global banking/credit system is paralysed and the global economy is sliding into a deep recession. Obamas 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 Obamas inauguration in January.
Many of Obamas 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 nationalize or partially nationalize 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 Obamas economic advisers include Lawrence Summers and Robert Rubin, both former treasury secretaries under Bill Clinton. Undoubtedly, they energetically promoted the acceleration of deregulation and globalization. This has led some liberal Democrats to lament that Obamas economic policies will be more of the same, a continuation of the Clintonomics that paved the way for Bushs policies.
But the economic position has completely and utterly changed. The deep crisis of U.S. 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: Theres 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 U.S. 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 U.S. 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 U.S. 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 U.S. 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 U.S. 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 U.S. 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 U.S. 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 organizations that represent the interests of the working class.
Obama’s victory has aroused huge expectations internationally, as in the U.S. 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 Bushs 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.)
Obamas 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 U.S. president who has faced such an array of intractable problems internationally.
During his campaign, Obama promised that the U.S. would withdraw from Iraq within 16 months. This withdrawal, however, applies to combat troops, and other U.S. 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 U.S. 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 U.S. imperialism. Already his support for U.S. 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 U.S. would expect changes in behavior and there are both carrots and there are sticks available to them for those changes in behavior. Clearly, behind this ambiguity, there is still the threat of the possible use of military force against the Iranian regime.
Within hours of Obamas victory, the Russian president, Dmitry Medvedev, announced that Russia would site missiles in Kaliningrad to counter any U.S. missiles based in Poland, etc unless the U.S. abandoned its missile defense 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 Obamas 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 Obamas 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 Americas 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 U.S. imperialism than his predecessor. But, ultimately, he will be the representative of U.S. imperialism, and will not hesitate to use its economic power and military force to safeguard its interests.
U.S. imperialism has been weakened by the economic crisis and military overstretch but it remains the worlds 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.