Sunday, 10 July 2011

"CRISES PRESIDENTS": Obama v. Hoover and FDR

With the caveat that any comparison between a sitting President and one who governed eight decades ago is unfair and in some respects unhistorical, I think some worthy comparisons may help to understand historical dynamics. In the 1930s as in 2009-to-the-present, capitalism experienced a crisis of confidence that stemmed from structural factors built in the political economy. Inability on the part of the financial and political elites to strengthen the strained capitalist regime while maintaining social equilibrium made matters worse.

In the first decade of the 21st century, the US is very different in terms of its domestic institutional structure and its global role than it was in the 1930s. Of course, the same is true for Europe and most of the world. Politically, economically, socially, and culturally, in the last eight decades America evolved from a great power to a superpower, showing steady signs of structural weaknesses since the end of Vietnam War. 

The rest of the world also underwent drastic changes from multi-polar in the interwar, to bipolar during the early Cold War, and back to quasi-multi-polar after the collapse of the Soviet bloc and relative economic strength of EU, China and Japan competing with the US. There are six structural similarities and differences in a number of areas worth noting between the world of Hoover and today’s world. 
First, Hoover’s America came out of the 1920s when the government had deliberately and unsophisticatedly entrusted inordinate powers to the speculative private sector. Such trust extended to the degree that the national interest was identical to unbridled large capitalist interests representing a mere 5% of the population. With some nuances of style, the same mindset also prevailed from the Reagan-Thatcher era to the recent crisis that exploded in 2007 and continues to this day. 
Second, during the interwar era there was considerable popular opposition against multilateralism because the Wilson administration, major banks, and export companies, especially weapons manufacturers, dragged the country into WWI, which was the culmination of diplomacy and wars of imperialism since 1870. Isolationism entailed pursuing a unilateral foreign policy where the US would not become entangled in European affairs and would confine itself in the Western Hemisphere. 

Aspects of neo-isolationism (unilateralism and complete disregard of the UN) were evident from Reagan to the second Bush administration, with the US essentially dragging major allies to go along with militaristic adventures that added nothing but larger budgetary allocations to the Pentagon. At the same time, the US would not permit multilateralism on the crucial Israeli-Palestinian conflict which was and remains catalytic to regional stability and arms reductions for many large and small countries alike. 
Third, the Great Depression hit at a time that the entire world economy was strained and trying to recover from the devastation of WWI, a time when speculative investment went unchecked by the state and destabilized capitalism’s foundations. The recent (2007-present) economic crisis too came after US regional wars and massive defense spending that diverted resources from the civilian economy fuelled by massive borrowing and speculation. All this despite the end of the Cold War, all this despite massive US balance of payments deficits and rising national debt!
Fourth, the lack of multilateral political cooperation and persistence of economic nationalism until the adoption of Keynesian policies accounted for worsening conditions during the 1930s. In today’s post-Keynesian world with strong central bank and IMF/World Bank, together with European Investment Bank intervention, a crisis of the 1930s magnitude was averted. Nevertheless, workers and the middle class whose confidence in the system has been shaken throughout the world are paying and will continue to pay for the crisis that the financial and political elites caused. 
Fifth, in the 1930s global political and economic leadership was lacking largely because of a politically-polarized world between Stalin’s Russia on one side, the rise of Fascism, Nazism, Imperial Japan, and ‘Native Fascism’ in many European countries, on the other, and of course, France, England and the US trying to maintain war-weary pluralistic societies but without compromising capitalism. This meant that pluralistic countries adopted the most obvious strategy of survival that entailed working with Fascism, Nazism, Imperial Japan, and ‘Native Fascism’ because it was more profitable and ideologically acceptable than the ‘real enemy’ Communism. 

The "war on terror" notwithstanding, today's political/ideological polarization is not as sharp as it was in the 1930s. We do not know that the bourgeois democratic consensus will remain much longer  but the US is not threatened by sharp sociopolitical divisions that existed in the 1930s and that F. Roosevelt very ably mitigated through his New Deal policies.

However, there is a multi-polar world that is questioning the hegemony of the US and the Bretton Woods system responsible for cyclical crises and perpetuating dependence and underdevelopment in the Third World. Many Third World countries, Russia, China, and to a lesser extent the EU want a new Bretton Woods system to reflect today’s world, a world where American-style capitalism does not determine the fate of the planet. How long can the US count on China and others to buy its debt (Treasury bonds) so that the US can continue deficit spending, without damaging consequences on the dollar as a reserve currency? As the US public debt remains above 100% of GDP, and as long as the balance of payments remain high, the threat of sociopolitical polarization will rise.

Sixth, the depth of the depression that caused chronic unemployment (20-30%) accounted for cultural shocks as described in the literature of that era. Today the US and EU have around 10% unemployment (much higher with hidden unemployment and underemployment), but not nearly as ominous as the 1930s levels. Moreover, governments today offer some relief through social programs, they are investing in some labour-stimulus programs, and it appears that by the end of 2011 job-growth may stimulate the next economic upturn. However, that may not last long. After the 2012 general election, there may be another economic downturn.

America’s leadership under Obama a year after he took office has a mixed record at best. Obama is the product of a well-polished Democratic machine coming to power and confronting the problems of the worst President in America’s modern history. Hoover and FDR lived before the TV and internet era, when ideology and the politician’s credibility on the effectiveness of their policies was a dominant feature. 

By contrast, Obama grew up in an era of marketing and packaging of politicians by PR firms, an era in which strong domestic and foreign lobbies shape political agendas and finance campaigns to determine who wins, an era when ‘spin doctors’ are far more effective than Las Vegas illusionists in shaping public opinion. Obama is a reflection of a superficial hedonistic self-indulgent culture that believes if hero-politicians look, sound, and behave as people want to perceive them, then all is well and success is ours if we merely call it so. 

Obama is pursuing policies that exacerbate deficit spending (more foreign borrowing that consequently weakens the already debilitated dollar) and not necessarily to restructure the civilian economy on a sound basis but to feed the Pentagon’s bottomless money pit and the financial elites who caused the current crisis. Where is the evidence that Obama has done anything other than to strengthen the financial elites who have no intention of changing the way they do business, including collecting massive salaries, stock options, bonuses, and other corporate perks? 

Where is the evidence that Nobel Peace Prize winner Obama has done anything substantive to end costly and destabilizing military conflicts, which were contributing causes to the current crisis? He appeared somewhat awkward receiving the Nobel Peace Prize and politely noted that others were more deserving – this speech on the day thousands more US troops headed for the land that produces 80% of the world heroin! If the grand accomplishment of this president is not in foreign affairs, and it is clearly not, and it does not rest in major economic/financial restructuring that would stabilize society, where is Obama's forte?

After eight years of Bush in the White House, Obama spells relief for America and the world but only as a symbol and nothing more. Beneath the symbolism, it seems that he is not and most likely will not evolve into another FDR, as some analysts would love to compare him whether they are motivated by approval or disapproval of his administration and its policies. 

Nor does he measure up to Hoover who laid the foundations for FDR (Cordell Hull’s) foreign policy, managed the budget responsibly against immense pressures, and tried to conduct policy against a domestic and foreign environment that was not nearly as cooperative and welcoming to Hoover as it is to Obama. That he may win another term is probably a safe bet; but that he will accomplish even less in his second term as he becomes even more conservative in policies and he is unable to strengthen democracy by strengthening the middle class and workers is also a safe bet.

No comments: