The US electorate has created history by sending the first non-white president to the White House. Whether Barack Obama will create history or not is dependent on how he tackles the global economic crisis which, by far, is the deepest crisis, outstripping the Great Depression of the 1930s.
Speaking of the crisis, Obama said, “The decline in our GDP (gross domestic product) didn’t happen by accident. It is a direct result of the Bush administration’s trickle down, Wall Street first, Main Street last, policies.” This gives a hint of correct identification of the major culprit for this crisis being international finance capital and its speculative activities in search of quick super profits.
Earlier, he had said, “The engine of economic growth for the past 20 years is not going to be there for the next 20. That was consumer spending. Basically, we turbocharged this economy based on cheap credit.” But the days of easy credit are over, Obama said, “because there is too much deleveraging taking place, too much debt”. A new economic turbocharger is going to have to be found, and “there is no better potential driver that pervades all aspects of our economy than a new energy economy… That’s going to be my No. 1 priority when I get into office”.
Until concrete prescriptions emerge after his assumption of office, we can only infer from these comments two simultaneous directions in which the US may proceed. The first is the fire-fighting injection of liquidity to stem further collapse of the financial markets. The US has already pumped in $2.5 trillion (Rs118 trillion). The Bush administration will leave behind for Obama a staggering national debt of $10.3 trillion. Given this, the options for a further fiscal stimulus appear very limited, as estimates of the budget deficit next year already spiral above $1 trillion.
The injection of liquidity, however, will not be able to stem the crisis, because of the increase in the lenders’ perception of risk. This is so because the solvency of the borrowers has become suspect owing to the presence of a plethora of “toxic” securities in the system. What is required, therefore, is to improve the solvency of the borrower and not inject liquidity for the lender. This can only be done through massive doses of public investment.
In other words, Obama has an opportunity to offer a new “New Deal” a la president Roosevelt following the Great Depression. This, however, would mean recognition of the bankruptcy of neo-liberalism that provided the ideological prop for finance capital-led speculative growth bubbles that have burst one after the other, culminating in the current crisis.
Will president Obama rise to the occasion? Or, will he preside over the efforts of the giants of international finance capital to emerge from this crisis heaping further miseries on the peoples of the third world? The choice that Obama makes will define the people’s response to US imperialism globally.
The author is member, politburo, Communist Party of India (Marxist).