Obama’s Woes and US Imperialism

Subhanil Chowdhury has done PhD in Economics from Jawaharlal Nehru University, New Delhi. A graduate of Presidency College, Kolkata, Subhanil is an Assistant Professor in Institute of Development Studies Kolkata (IDSK) and is associated with Communist Party of India-Marxist. His email id is subhanilc@gmail.com.  

Subhanil Chowdhury

President Obama, two years back, was the darling of the American voters who not only made him President by a landslide but also, in the process, elected the first Black American President. President Obama fought the elections in the context of one of the most unpopular Presidents in the history of the USA, whose misadventures in Iraq and Afghanistan was a failure. Closer at home, President Bush presided over the worst economic crisis in the USA, since the Great Depression. These two factors added with President Obama’s flamboyance, oratory skills and political acumen saw him at the highest post.

Two years, however, is a long time in politics, particularly when one is in the midst of a severe recession and its aftermath. Exactly after two years of getting elected to office President Obama has faced defeat in the recently concluded elections to the House of Representatives and the Senate with the Republican Party clearly emerging as the winners. The comeback of the Republicans is even more spectacular because of the degree of defeat that they faced in the Presidential Elections in 2008 as well as the Midterm Elections in 2006. Many had proclaimed that the American voters have decidedly turned liberal, if not left, and the conservative ideology has been decidedly thrown out of US polity. These pronouncements have been proved to be false, with the American voters voting for the conservative as well as the ultra-right Tea Party candidates overwhelmingly. What has changed in these two years to account for such dramatic comeback of the Right in the USA?

The answer lies in the economic crisis of the USA, which was at the forefront of the agenda of President Obama when he assumed office. The major initiatives taken by his administration was the Stimulus Package worth $800 billion, signing of the Wall Street Reform and Consumer Protection Act and the Health Care plan which tries to provide insurance facilities to a large number of American households who were outside the purview of Health Insurance. While these initiatives were aimed at tackling the crisis and to provide relief to the people reeling under the economic catastrophe, unemployment stubbornly refused to come down. The unemployment rate in the USA continues to be around 9.6% even after the implementation of the stimulus package. As far as growth is concerned, US economy started registering positive rate of growth from the third quarter of 2009 (1.6%), which increased to 5.01% in the fourth quarter of 2009 and has subsequently decreased to 2% in the third quarter of 2010. In other words, the pace of recovery of the US economy is far from satisfactory with all indicators pointing towards a static economy or at best a sluggish economy over a very long period of time.

This far from satisfactory condition of the economy is bound to give rise to anger of the people against the ruling government. In this overall atmosphere of frustration within the people, the Right Wing ideology of laissez faire capitalism with unbridled power to the private sector and no role of the government came to the forefront. While it is the same ideology of free markets that led to the collapse in 2008, was conveniently ignored by the right wing ideologues of the Tea Party and Republican Party. Instead, the continued woes of the people were portrayed to be a result of the policies of President Obama entailing too big government and massive deficits which is supposedly sure to scuttle the private initiatives and therefore will kill innovations, the main engine of growth of the US economy. All these positions are completely wrong.

The question of too big or too small government is basically meaningless, particularly, at a time of depression. A situation of recession/depression basically is one where private investment or expenditure is not forthcoming giving rise to the situation of a deficiency of aggregate demand. Now, with uncertain future nobody is willing to spend in the USA, which is sure to drag the economy even further down. Therefore the only way to boost up the economy and achieve growth is to allow the government to spend and resolve the problem of effective demand. In the process, it is undoubtedly true that fiscal deficit will rise. But in a condition of massive unemployment and unutilized capacity, such rise in the fiscal deficit is never a problem. Moreover, the Republicans demand that the tax cuts to the rich announced during the Bush regime (which was supposed to expire on 31st December 2010) be coninued further. The permanent extension of these tax cuts would cost the federal government $680 billion in revenue over the next 10 years. In other words, any such extension is bound to increase the fiscal deficit even further. Therefore, if the Tea Party or the Republicans were concerned about the growing fiscal deficit in the USA, they would not have demanded permanent extension of these tax cuts.

What matters for the right wing in the USA is not whether fiscal deficit is high or low. What concerns them is whether the policies are benefitting the rich and the corporate in the country or not. Therefore, when fiscal deficits increase as a result of providing unemployment allowance or financial help to home owners to avoid foreclosures, the Republicans cannot tolerate it. However, when the same fiscal deficit is increased to provide tax concessions to the rich, corporates and the financial sector, it is welcomed. However, it is also the case that a large section of the US population have voted for the Republicans even from the working class and middle class America. How could the Republicans manage to win their votes with their politics clearly favouring the rich?

The answer lies, contrary to the belief of the right wing, not in too big stimulus plan of President Obama but in the fact that the stimulus was too small. The stimulus was worth around $800 billion, out of which 60% was in the form of tax cuts. So effectively only around $320 billion was for direct expenditure. Moreover, at the same time the spending of the state governments were severely cut, which effectively meant that the fiscal stimulus was at best too small and at worst negligible. The fact that it was so is bourne from the unemployment statistics and very slow growth of the US economy. Clearly, President Obama did not do enough to take the economy out of the crisis that it is in.

The real issue is why did President Obama settle for such a small stimulus. Various answers to this question has been posited, dwelling on President Obama’s personality, his lack of leadership etc. The real issue however was a much deeper one. Finance capital abhors government expenditure, if it is not to its own benefit. Such opposition to enlarged government expenditure is not new. In1929 in Great Britain when Llyod George proposed an increase in public expenditure to provide employment it was vociferously opposed by finance capital with the British Treasury coming up with the view that any increase in public expenditure offsets private expenditure by an equal amount and has no effect on employment. This is known as the “Treasury View” in economics. It was left to Richard Kahn and John Maynard Keynes to theoretically show the vacuousness of this view. Moreover, President Roosevelt’s New Deal introduced during the Great Depression led to recovery between 1933 and 1936. It was however prematurely withdrawn in 1936, again as a result of opposition of finance capital, leading the US economy back into a recession. The US economy could only recover from this recession only with the World War II. Even in the present context of the US economy, there is tremendous opposition to public expenditure which prevented President Obama from undertaking a bolder stimulus package.

It is however also the case that President Obama is no Keynes and has very little conviction for a radical role of the government in ameliorating the condition of the unemployed in the USA. In his first State of the Union Address he said,

“But families across the country are tightening their belts and making tough decisions. The federal government should do the same….Starting in 2011, we are prepared to freeze government spending for three years….if we don’t take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery”

All these views about comparing a family with the Federal Government, promise of a freeze on government expenditure, fear of debt damaging the markets are essentially reminiscent of the Treasury View. The interest rate in the USA is at historically low levels, even after the stimulus and there is absolutely no economic reason as to why the US Government cannot increase its debt even further. In other words, President Obama has been, at best, a reluctant Keynesian and has therefore formulated a plan which was clearly not enough.

The reason for President Obama being so guarded has to do with the politics that he represents in the USA. Undoubtedly, he is not a left wing radical. Rather a moderate in terms of his rhetoric about US foreign policy, who is none the less totally committed to the ideals of free market economy. His campaign for US President in 2008 was funded hugely by the corporate sector including such big names as Goldman Sachs, Microsoft, Google, Citigroup, JP Morgan, IBM, Morgan Stanley etc. It is therefore difficult for him to suddenly become a radical in economic policy and completely disregard the interests of finance capital and the American corporate sector.

The tragedy with the American people however lies elsewhere. It is indeed the case that the election of Mr. Obama to the US President was a historic achievement in a country which till a few decades ago did not allow the black population to cast their votes. Additionally, President Obama rose on the tide of the resentment against the Republican regime particularly after the crisis. His message of hope and change struck a chord with the American people. But President Obama is also a part and parcel of the US imperialist structure and its relation with US corporate interest. He clearly had to function within the rules set by this structure of the US economy and polity. This structure on the other hand is facing its worst crisis since the days of the Great Depression. It is clear that simply by functioning within this structure will not help ameliorate the condition of the people and fulfill the call for ‘change’ that President Obama proposed. Either this structure has to change or some other avenue of job creation and growth has to be found. The first was never an option for President Obama. He has now started deliberating on the second option.

In order to boost domestic employment and growth, which has not recovered much even with the stimulus, the US is looking at other parts of the world. The controversy surrounding the appreciation of the Chinese currency is a part of this project. With the Chinese appreciating their currency, imports from China in the US will decline thereby increasing their domestic employment. In the process however, workers in China will become unemployed, if the currency appreciation is not matched by an increase in domestic aggregate demand in China through an increase in public expenditure. The tension between China and the USA on the issue of the currency is nothing but an attempt of the USA to export their unemployment to China.

The bigger project however with regard to this aspect is with India. President Obama is visiting India from today. He has clearly stated,

It is absolutely clear that the key to creating new jobs is opening markets for American goods made by American workers. And that is why on the trip I am undertaking, I will be talking about opening up additional markets in places like India.”

Faced with defeat at home, President Obama is coming to India to create new “American” jobs. The sectors where he would focus on would pertain to opening up retail trade to US MNCs, opening up the Indian financial sector to US financial firms, opening up India’s nuclear sector by importing US nuclear reactors without the liability clause and a massive defence deal involving the purchase of 126 sophisticated aircrafts from the US costing Rs 45000 crore. All these initiatives if undertaken will clearly create jobs in the USA but at the costs of the interests of India’s toiling masses. The opening up of the retail sector will destroy millions of jobs in India. The further opening up of the financial sector will only expose India even more to global speculations in the international financial markets. The other issues mostly pertain to the interests of the rich and elites in India having zero or negative impact on the people of the country.

The Indian elites, now having global ambitions, have no qualms in handing over these sensitive sectors to the US corporate interests. In the process the working class in India will suffer tremendous loss of livelihood. Such export of unemployment to India is clearly unacceptable and should be resisted at all costs. At the same time it needs to be ascertained that the American workers who have lost their jobs are equally the victims of corporate led globalization. It is US imperialism which in order to solve its internal problems is trying to export unemployment to countries like India, thereby pitting the American working class with their Indian counterparts. It is therefore incumbent upon the left forces to clearly articulate this visciousness of capitalism and imperialism and project an alternative economic system transcending this predatory capitalism. The struggle for transcending capitalism is therefore intrinsic to the amelioration of the conditions of the working class both in the USA as well as in India.

Courtsey: pragoti