By Rawle Lucas
Seminal Moment
Looking out on the millions who braved the cold on January 20, 2009 to embrace, in person, a seminal moment in United States history, President Barack Obama saw a sample of the enthusiasm and hopefulness that his election to the highest office in the land inspired. The feelings of euphoria and hope were not confined to America. They were shared by many all over the world and in places that claimed the 44th President of the United States of America (USA) as their own. His ascendancy to the presidency of the most powerful country in the world was, as he put it, a triumphant of hope over fear. But to many others, it was a reflection of a nation that dared to challenge itself once more and one that was moving ever closer to aligning its values with its beliefs and ideals.
From the images and words expressed, there is no doubt that people around the world appreciate this momentous turn in US history. Yet, for many, there is still enigma and uncertainty about what this change in American leadership means to them and the wellbeing of the citizens of their countries.
Dichotomy
The apprehension is understandable since this historic political development comes at a time when the US economic landscape was littered with wrecked economic fortunes and personal lives and there was a growing dichotomy between US economic philosophy and practice. In contrast to its free market character, the US government has become a major player in the US economy not unlike in ways seen in developing countries where, amidst structural rigidities, the government is often seen as the best hope. The US government has already been authorized to spend over US$700 billion over and above its normal budget allocation, and is increasingly being forced to honour the title of lender of last resort. President Obama is looking for permission to spend nearly an additional US$1 trillion to stabilize and stimulate the sagging US economy.
The motivation for the apparent philosophical shift in economic behaviour is caused by the inability of the traditional monetary policy tools to deliver any assurances or relief to the economy. There is clearly a loss in confidence in the markets since no one knows with any certainty what most assets are worth. The inability of the markets to accurately price assets is causing the US economy to haemorrhage jobs and to process unprecedented numbers of unemployment claims. Alongside the loss of over 2 million jobs in 2008 with many more expected in 2009, the stock market lost US$6.9 trillion in value. This financial loss reflects a nearly 40 percent decline in the combined wealth of individuals and businesses or, alternatively, an amount equivalent to half of the gross domestic product (GDP) of the USA.
In addition, the US housing market, another important source of wealth, was weak and the value of homes remained distressingly low. The automobile industry was in trouble and credit markets remained tight despite historically low interest rates. Americans no longer feel financially secure and are becoming anxious about their future.
Other Developments
Those were some of the things that were happening in the US economy. There were other developments of an historic nature happening beyond its borders. China has become the largest creditor of the USA surpassing the Japanese as the holder of this title. China has also become the third largest economy in the world upon edging out Germany for this privileged position. It is within striking distance of Japan that holds the number two spot on the GDP size chart.
In addition, the government of Iceland has collapsed and the British were nationalizing their large banks and were getting ready to tighten regulations in an attempt to avert a similar fate. The price of commodities exported by developing and emerging economies were falling with the potential for adverse impact on domestic spending.
Different Tone and Attitude
It is against this backdrop of global economic uncertainty and flux that the new American president has taken over leadership of the country and the world. He is undoubtedly facing a broad range of economic and security challenges across all regions. Yet, there is the belief in the USA and abroad that this new administration would be able to improve significantly the image of the US abroad and the circumstances of the world. While US foreign policy under this new administration is still to be fully defined, the contours of that policy are already visible. Within one week of changing leadership, US foreign policy sounds and looks quite different from that of the recent past.
The willingness to do the nation’s business with a different tone and attitude was evident in the inaugural address of President Obama. The new president signalled to the world that he was ready to make American leadership and goodwill available to it again. This he intended to do using diplomacy and development assistance. This position was reiterated by the new Secretary of State, Hilary Clinton, in early remarks this week to employees of the State Department.
From his inaugural speech, it is clear that President Obama also realizes and acknowledges that US prosperity is tied to the prosperity of the rest of the world. He understands that as he tries to stabilize and grow the American economy and solidify its security, he needs to be mindful of how well that policy is serving Americans and those from around the world who are participating in the exchange. This is an indication that, despite the temptation, free trade was likely to be a fundamental economic vehicle used by the new administration to convey prosperity between the USA and the rest of the world.
Lopsided View
The risk of America’s diplomacy is that, though more respectful and cooperative, it might take a lopsided view of the world. With the exception of references to Cuba and Venezuela, there is no clear definition of what the US policy would be towards the Latin American and Caribbean region. One could only wait and see since there are other pressing matters in front of the new president. However, a failure to engage this region early and fully could lead to misunderstanding and missed opportunities.
Many changes have occurred in the Latin American and Caribbean region over the last decade with meaning and substance for US policy. Where it occurs, power keeps changing hands peacefully. Still, the region is full of countries that have populations living in poverty and looking for opportunities to ameliorate their suffering. It has many countries that are prone to natural disasters and ecosystems that are vulnerable to environmental attack. It has many countries that have ecosystems with the capacity to fight global warming. It has many countries that offer trade and investment opportunities that could have a positive impact on the US economy. In other words, the Latin American and Caribbean region has many interests that are compatible with those of America. The region therefore offers the new US administration a significant opportunity to fulfill its pledge of working alongside the poor and others to achieve a better life and to return the benefits of prosperity and security for Americans.