The Obama Effect
American politics are more complicated than a Rubik‘s Cube. There are delegates, pledge delegates, super delegates, unseated delegates ‘" and we haven‘t even started to think about the presidential election in November. To those of us in the rest of the world, it‘s weird.
The U.S. Economy and Small Business
The U.S. economy has become a bellwether for the state of world economics due to the sheer size of the country‘s GDP. The U.S. produces more than Germany, Japan and the UK combined.
During the Bush administration, we saw economic good times for a few years with the Dow just peaking out at the 14K level but since then it‘s been down significantly.
The dollar continues to weaken against foreign currencies ‘" especially the Euro ‘" the sub-prime mortgage disaster is draining equity from U.S. homes (80% of assets owned by Americans are in their homes), commodities markets are reaching new highs on oil, corn, wheat and precious metals, which in turn fuels the U.S. inflation rate, currently running at 4%.
It has been clear the Americans want a change from the failed economic policies of the Bush administration ‘" from Greenspan‘s devaluation of U.S. currency (at one point available to institutions at 1%) to Bernanke‘s Chinese water torture approach to economy management. Despite a couple of drops in U.S. lending rates (including one of 50 basis points) the U.S. economy is in the dumps.
Which leads me to:
Barack Obama ‘" Economist‘s Rookie of the Year
I‘m not sure the U.S. economy can be saved over the short-term. The country spends $12 billion a month in Iraq and Afghanistan. According to Obama, ‘…we can‘t engage in the kind of infrastructure improvements that are going to make us competitive…(as long as the U.S. remains in the mid-east).
The American media have been all over Obama‘s lack of experience in economics and, even the Democratic nominee has admitted that he lacks experience in this realm. A careful examination of Obama‘s economic platform clearly indicates that his interests are narrow and lie on the side of the consumer. The planks of the Obama economic platform include such objectives as:
The establishment of a credit card bill of rights (a consumer issue) A bailout of individual home owners facing foreclosure (an expensive consumer issue)
In the Senate, Obama voted against an amendment to a bill that would cap all interest at 30%, stating he thought the 30% ceiling was ‘too high.‘ (another consumer issue)
At the Democratice debate, January 5, 2008, Obama stated ‘Part of the reason that Kuwait and others are able to come in and purchase, or at least bail out, some of our financial institutions is because we don‘t have an energy policy. We are spending close to a billion dollars a day. A realistic plan is going to reduce our dependence on foreign oil, and to invest in solar & wind & biodiesel. That would make a substantial difference in our balance of payments, and that would make a substantial difference in terms of their capacity to purchase our assets. (Not exactly a quick fix in my opinion, though a noble sentiment)
At a debate in Des Moines on December 13, 2007, Obama proposed eliminating $150 billion in tax cuts ‘for the rich.‘ Unfortunately, it‘s the rich that provide financing for new ventures in most cases.
On December 4, 2007, Obama stated on NPR (National Public Radio) that he would ‘take China to the mat‘ on issues of currency manipulation. In my opinion, this clearly demonstrates Obama‘s economic naivetÃ. After all, the Chinese are buying up U.S. debt and bailing out failing businesses. The Americans will have little clout in this discussion. Remember, the guy with the checkbook is the boss and Obama had better learn quickly who‘s holding cash ‘" the cash the U.S. needs to right its economy and bring some stability to global markets.
Obama is clearly a charismatic figure and he did beat the powerful Clinton machine. So, now, Americans will be left to choose between Republican John McCain and Democrat Barack Obama.
Who‘s the better choice for Australian business owners?
McCain readily admits he lacks experience in global economics. I view that as a good thing. A man willing to admit a lack of knowledge is more likely to choose advisors and heed their advice ‘" something that‘s been sorely lacking over the past seven years in U.S. politics with George Bush. However, I wonder if McCain can inspire and motivate world markets ‘" the ones in which we all participate.
My inclination is that Obama, despite his narrowly-focused, consumer-oriented economic platform, has a better chance to inspire the American people who recently gave Bush a 29% approval rating ‘" the lowest since poll stats have been taken. I‘ve heard the man speak and, indeed, he is inspiring. However, it is important to Australian-based businesses and businesses operating in a global market that Obama expand his vision and see beyond the U.S. borders.
If he doesn‘t, the economic leadership role the U.S. has played for decades will continue to erode as business owners in Australia turn their attention to the growing economies of China and India.