Morrison
Even though Barack Obama's election to the US presidency was a gratifying turn of events for those, including me, who were emotionally invested in his campaign from the beginning, we would have to concede that his success was ensured by the economic emergency that hit America in September 2008. Up until then, Obama's positioning of himself as a smart, steady character, and perhaps a post-partisan, post-racial figure, may not have guaranteed his 'audacious victory'.
But as the US financial system began to implode and the resulting economic discombobulations set off panic, Americans reached for Obama's perceived pragmatism and even-temperedness to guide the ship of state through the worst crisis since the Great Depression. We should therefore not be shocked by the dour mood that has set in, as magical thinking that Obama could make things copacetic again is being overwhelmed by the ongoing harsh economic realities.
Indeed, it was not too long before anger about the wreckage left by the economic meltdown would turn the political winds against Obama's administration. That anger is akin to the jitters that come with shaking off addictions. The reality is that after 25 years of spending, lending and borrowing on 'easy money', Wall Street's great bull market and cheap fossil fuel, America's economy suddenly went off the rails.
economic crisis
Coping with high unemployment, record housing foreclosures and depleted savings will, therefore, be traumatic for the characteristically impatient Americans. America's economic crisis had, however, been long in the making - for at least the last quarter century. Back in the early 1980s, each household saved 11 per cent of its disposable income but, by 2007, the number fell dramatically to less than 1.0 per cent. Meanwhile, the share of its income spent servicing its mortgage and consumer debt went up by more than a third as its indebtedness grew sixfold.
In the long boom from 1984 to 2007, the average new house increased by one-half and by 2007 an adult of a given age was at least 20 lb heavier than a person of the same age in 1984. Not surprisingly, a third of Americans were obese in 2007 compared with 15 per cent in the 1970s. According to Kurt Andersen, novelist and former Time magazine columnist, Americans decided that Mardi Gras and Christmas were so much fun that they ought to be made "a year-round way of life".
Americans were living large not just at the level of households but at the level of the federal, state and local government, and also in the corporate sector. The federal government debt skyrocketed under the Reagan administration, moderated under Bill Clinton and then exploded under George W. Bush, who cut taxes while prosecuting two wars - a first in American history. All told, Americans' debt went from US$7.4 trillion in 1984 to well over $50 trillion by 2008, a seven-fold increase.
While the US was involved in an orgy of debt - mortgage, consumer, corporate and financial - industries that it once dominated fell into deep trouble. One such is the automobile industry where General Motors (GM) for decades was the backbone of US industrial might. For the last quarter century to 2007, GM continuously lost market share as foreign brands bettered it on quality, price and reliability, and latterly on fuel efficiency, when high gasolene prices sent US consumers scurrying to abandon gas guzzlers.
By the end of the Bush administration, American capitalism faced the humiliating spectacle of massive state intervention to save this flagship company and Chrysler, which together with Ford had been symbols of American industrial dominance for much of the 20th century.
orgy of debt
Along with the orgy of debt came the financialisation of the US economy as the financial sector overtook all others: manufacturing, health, construction, distributive trade, et cetera. When Richard Nixon left the White House in the mid-1970s, the US manufacturing sector's share of GDP was more than one and a half times that of the financial sector, 24 per cent versus 14 per cent. But by 2005, the table was turned as the manufacturing sector slipped to 12 per cent while financial services climbed to 20.4 per cent. America was clearly losing its industrial preeminence, as evidenced by the displacement of its industrial capacity by imports and China's emergence as its largest source of imports and creditor.
Apart from overseeing two wars, Barack Obama is expected to turn the American economy around. His task is an unenviable one that is being made more difficult by the ultra-partisanship of the Republican opposition in Congress. His administration's first necessary step to prevent the collapse of the financial system has produced positive results, with American banks now returning to profitability.
halted the decline
His bitterly criticised stimulus package and the continued monetary interventions of the Federal Reserve have also halted the decline in the economy.
Notwithstanding this, the historically high rate of joblessness that is gripping two-thirds of all metro-regions of the country is bearing down on the spirit of many Americans. And it is fuelling populist outrage that could well upset the majorities held by Obama's Democratic Party in Congress. Thus, his reform agenda in areas critical to America's resurgence - energy, financial regulation, education and health care - could be blunted.
Though the vituperative tone of Republican criticism of his policy initiatives may betray a tinge of racism, it is remarkable how the fact of Obama's race has slid into the "shadows of public consciousness". Yet, some of us still hope that beyond the crises his election will herald a new era of racial reconciliation.
Dennis Morrison is an economist. Feedback may be sent to columns@gleanerjm.com.