When the Best Is Not Enough

Not even the best available president, or the best political system, or the world’s most eminent elites have managed to change the parameters of the global economic system. The crisis, however, has accelerated the arrival of the future, under the form of a world that is multi-polar in economic terms, and mobilized in social terms.The year 2011 began with major changes in the world’s geopolitical arena. In January, we witnessed President Obama’s second State of the Union address, a speech in which each president reports on the condition of the US economy and society before the Congress. January is also the month when the world´s political elite meets at the ski resort of Davos, Switzerland. And this past January was particularly marked by two major, unplanned social developments: the revolutions in Tunisia and Egypt. There is no doubt that “the time of the people” has come, with all the connotations of hope and fears this phrase (coined by Juan Domingo Peron) entailed for Argentineans thirty years ago. There are three episodes of capital importance, which I will analyze one by one. Before, however, I would like to explain the title of this article. This being an opinion piece that, as it is commonly said, “does not represent the views of the editors”, I will show my cards.

By “best” I understand, at the level of the elites, the most qualified leader cadres, and, at the representation level, the most fair and stable political model. In the former sense, I have no doubt that Barack Obama is the best US presidential figure: because of his intellectual capacity, his outlook on the future, his progressiveness, his age, and everything he stands for in the new world. Neither do I have any doubt that the meeting of the world economic forum in Davos brings together the cream of the crop of the planet´s business, academic and political worlds. These two aspects of the adjective “best” – in relation to both the elite and the participatory senses – are sometimes contradictory, and other times, convergent. I like it when a member of the finest elite (i.e., the best ones) such as Winston Churchill, defends a system that is, seemingly to the contrary, egalitarian and massive. To save the contrast, Churchill resorted to his trademark sense of humor by saying, “Democracy is the worst form of government, except for all the others.” And here I get to the crux of my point: not even the best political leaders, not even the best representation system can, by themselves, successfully tackle the world crisis.

Obama´s speech was more significant for what it did not say than for what it said. President Obama chose to skip over the uncertainty of the economic crisis, deeming the Great Recession over, and speaking about recalibrating public policies, placing emphasis on long-term goals, to wit: clean energy and care for the environment in a context of global warming; public spending focused on productive investment, education, new clean, renewable energy sources, and infrastructure works, particularly broadband internet access and development of a high-speed rail network, like those that have been operating in Japan and Europe for some time now, and are already circulating in China. With this outlook on the future, he spoke about his hope that the United States would, in the long run, win the race for the future, which he compared to the “Sputnik moment”, when late President Kennedy decided to outperform the space advantage that the Soviet Union then boasted. The critical voices immediately argued that the analogy was incorrect, as the reform of a lagging economy is not a space race, nor is the US a “business concern” competing with other firms and, above all, in the past, the great American investments had been made at a time of economic bonanza, rather than in a context of deficit and default. As the president was preparing his speech, the major states in the Union (e.g., California, Illinois and New York) declared technical bankruptcy. At state and regional levels, the command is for austerity and budget cuts rather than large investments. At the federal level, the government saved the economy from financial disaster by issuing money, bailing out major banks and automakers, as well as financial insurance and reinsurance companies, which not only caused the deficit to skyrocket but also left extremely meager resources available for more productive investments. In other words, the huge over-indebtedness of the private sector was overcome via greater indebtedness of the public sector. The economy was bailed out through loss socialization and pseudo (temporary) nationalization of large economic groups, paying very little attention to the man in the street, who sustained, and still sustains, a high unemployment rate and consumption crunch, and the resulting shrinkage of aggregate demand. All in all, stimulus measures managed to halt the deflation spiral and a fall into a ´30s-type depression, though at a very high social and production cost. Today the economy is recovering, although many have been marginalized or left with very poor prospects for progress for themselves and their descendants. Like in prior crises, this one was taken as an opportunity to reduce jobs, to concentrate wealth even further in the hands of a few, and to improve the conditions for stock exchange and commodities investors. The policies of monetization, close to zero interest rates, and acquisition of toxic securities of huge bankruptcy-exposed groups resulted in new seeming growth, in a context we might identify as “global stagflation”. Easy money and outrageously low interest rates (available only to a selected public, inaccessible to man in the street) imply, on the one hand, domestic stagnation (consumers cannot, per se, sustain growth) and, on the other one, a shift of concentrated money toward commodities and emerging market securities, with the resulting “heating” of such economies and perverse side effects, such as more expensive foods and staples in the poorest countries. The US economic bailout policy today means that the country is exporting inflation. The President did not speak about the urgent need to correct such distortions; instead, he chose to speak at length about the long term (competitiveness, new jobs, technological innovation and physical infrastructure upgrade). His rhetoric sounded hardly convincing to a public that was crying out for more drastic short and mid-term solutions. In the picturesque northeastern State of Maine, when someone asks a local for road directions, he is answered sarcastically, “You can´t get there from here”. This is a very well-known joke, which clearly illustrates the dilemma facing Obama, not to mention the more drastic remark of illustrious economist John Maynard Keynes, “In the long run we are all dead.”

The insufficiency of the presidential address is primarily due to the fact that, since last November legislative elections, the President’s party has lost control of Congress to the Republican opposition, who won those elections in many States, and today is the House’s majority party. This means that the Executive must be ready to compromise with the opposition – a very tough challenge, as the opposition has grown increasingly recalcitrant and willing to sabotage governance in the hope that Obama may be ousted from the White House after the 2012 presidential elections. The Republican intransigence is due to the fact that the party’s social base has adopted radical, extremely virulent positions. The reason for this may in turn be found in the fact that unemployment, labor precariousness and overall decreasing social mobility of large middle class sectors have created a social psychology of resentment, the political expression of which is reactionary populism. As a historical example, the Tea Party movement is the US equivalent of last century’s French Poujadism[[Poujadism was a far-right political movement born in France by mid 1950s. It was named after Pierre Poujade, a French bookseller who created this very active and aggressive movement. It remained active between 1954 and 1958. The movement was organized around the Union de Défense des Commerçants et Artisans. Poujadism was anti-socialist, anti-intellectual and anti-European. Its social base was made up of small merchants and the petite bourgeoisie, which had been severely hit by inflation in the final years of the Fourth Republic.]]. Finding avenues of understanding with these forces is not easy, as reactionary populism has had a devastating effect on moderate Republican sectors, who were willing to make a pragmatic alignment with the Obama administration. To stay in power, the President must make significant concessions and shelve several major goals of his administration’s agenda. In keeping with the French example, the reader may compare the presidential shift towards the center-right with a similar strategy of French President Francois Mitterrand, when he came to power in 1981, and attempted at nationalizing major areas of the economy. President Mitterrand made a swift 180-degree turn, and was able to stay in power with a much more moderate agenda. In the case of the US, the situation is worse because the opposition’s inflexibility may even cripple the government in a context of a precarious economic recovery and new crises of all sorts that can be envisaged in the world’s horizon.

Obama’s budget proposal was, as of recently, included in the presidential agenda. The President acknowledges that the US scenario has been darkened by the huge clouds of an enormous deficit and a national debt of colossal magnitude. With less enthusiasm than his Republican rivals, yet equally overlooking the structural crisis, the President asked for program cuts and “making sacrifices” (generally poverty aid-related) in an area of budget accounting for only 12% of all obligations. The major deficit sources – the exorbitant and dysfunctional pension system (either reformed or non-reformed), the retirement system, and the various poor and elderly health care plans – are not even mentioned in the government’s budget, or in the opposition’s alternative proposals.

America’s two major political parties share the make-believe and pretense. The difference lies solely in the fact that the Republican party-prompted cuts might jeopardize the timid recovery the Democrats have managed to accomplish so far from the government. This leads me to a second point.

US democracy is fraught with serious flaws. Its representation system in Congress and presidential campaigns are under the pressure of the power and money of a handful of interest groups. Vote is popular, yet the process that leads to it is oligarchic. Another point reinforces this shortcoming: strong political polarization resulting in exaggerations and mud-slinging among rivals about objectively trivial issues, causing critically substantial issues to be overlooked. Even when there is not a clear-cut ideological division, there is mutual contempt and poor willingness to negotiate and work together in the pursuit of state policies. Finally, the US political cycle lasts only two years (for instance, the president is elected for a four-year term; yet, in his third year of office, he must start working toward his future reelection). In other words, the political system encourages improvisation, short-sightedness and, frequently, blindness in relation to essential, long-term issues. Today, dollarization and polarization define American politics. When the economic system works, politics may afford to offer paltry pastimes. When it does not work, the representation system gets stuck and stagnant, avoiding burning, topical issues the solution of which (not too hard to work out in technical terms) is dodged, circumvented and procrastinated. In sum, in times of crisis, far from solving problems, politics amplifies them.

History has taught us that democracy is imperfect and perfectible, yet preferable over any other system of government. Again, here the best is not enough. In the last congressional elections, the ruling party lost control of the House and was only able to keep their Senate majority by a hair. This circumstance compels president Obama to make concessions, and secures the Congress’s legislative paralysis. In the middle of the crisis, the handling of public affairs gets to a tragic deadlock. How long will this deadlock and mutual vetoing last? We do not know. What we know for certain, however, is that every day that goes by, one opportunity is wasted.
How much has the world changed since the crisis unfolded? In other words, what assessment can be made of the last three and a half years? With this question in mind I follow the debates of the Davos World Economic Forum, and of the G-20 meeting in Paris. I draw the following, simple conclusion: the crisis has accelerated the arrival of a future many of us still deemed distant. It has shocked both winners and losers.

The crisis has not been a new Great Depression (‘30s-type) nor meant the end of capitalism. Instead, it has produced greater regulation (especially in the banking sector), a shift from large private group indebtedness to public indebtedness, and greater state intervention in the economy: All this has happened in wealthy countries, and always within the current intellectual and institutional framework. Taking a more comprehensive view, however, we can see that the crisis has sped up the world’s re-balancing process, with a strong power shift from well-established to emerging countries, from West to East, from North to South. In this respect, the crisis has worked as an accelerator.

For the first time in contemporary history, debtors and creditors have swapped roles; the debt burden has been inverted. For the first time, industry has massively relocated from two continents to a third one. For the first time in a long time, the power of the mighty has shrunk in all areas, from the military to the technological and intellectual fields. Finally, there is not only an economic mobilization of until now underprivileged masses, but also a political mobilization in pursuit of participation, transparency and dignity. We have reached the threshold of a new, multi-polar world. This new world is faced with the challenge of managing the best in such a way that, this time, it may be enough.