His economic plan is too conventional

Obama and the world economy

For a generation, we have been living with the fiction that the world does not need governing. An orthodoxy has prevailed that states and nations should become creatures of globalisation - in other words, "market states". The job of the US, as the world's hegemonic power, has therefore been to promote ungoverned globalisation by promoting free finance and open markets with minimal rules - along with a global network of military bases to prevent any armed challenges to this notion.

It falls to Barack Obama to change this orthodoxy, and to introduce new systems of global regulation and governance. He has to combine Rooseveltian reformism at home with the international activism of Harry Truman. Whether the issue is climate change, the international financial system or the clash between Islamic fundamentalism and the rest, Obama cannot fall back on the doctrine that some combination of markets and brute force will fix matters. They haven't, and they won't. The US needs to construct nothing less than a new multilateralist international order.

The challenge is immense. Some of the problems would still be close to intractable even if there were more of a consensus on the approach - which there is not. For example, it is obvious that the entire fabric of the financial system - from floating exchange rates through to tax havens and the bloated $360trn derivatives markets - needs to be brought back onshore and managed so that its capacity for economic destabilisation can be constrained.

But are the great powers ready to accept the disciplines of managing a stabler international currency regime, by setting monetary and fiscal policy at home in such a way that the international system can function better? How would such a system work? Who, after a generation in which the only thinking permitted has been that which promotes markets, has even a semi-workable scheme to propose on currencies and banks?

So it is in issue after issue. By 2010 a quarter of global carbon dioxide emissions will come from China. The Chinese resist any deal that constrains this growth, insisting that the west must shoulder the burden of climate change adjustment and pay for the entire cost of improving China's energy efficiency. But an asymmetric deal of this type is not sellable in the US. In the Middle East, success requires Obama to take on the Israeli lobby at home to put pressure on Israel and build a coalition of pragmatic Islamic states abroad. Not impossible, but it has eluded every other US president.

All this has to be delivered while retaining what is good about globalisation - free trade. Economic growth, prosperity and employment generation have gone hand in hand with trade since the beginning of time. Globalisation has offered countries as disparate as Vietnam, Singapore, India and Brazil a way of bootstrapping themselves out of poverty. We need stronger rules about the organisation of trade - especially on labour standards and the environment - but the principle that borders should remain open to the movement of goods and services is a cornerstone of prosperity. Obama has a powerfully protectionist Democrat party to handle; the temptation to give in will be overwhelming.

Obama knows all this - but he is allowing himself to be too constrained by unnecessary genuflections to the mainstream thinking that has so let the US down. His economic recovery plan is too conventional. The US needs a huge fiscal boost; but it also needs the financial system reformed at home and abroad, about which Obama has said too little. So it is across the board. But he is his own man, and he thinks deeply. And if he can't do it, there are no other contenders. To coin a phrase, we must have the audacity of hope.

Will Hutton is executive vice-chair of the Work Foundation

This article first appeared in the 19 January 2009 issue of the New Statesman, Obama: What the world expects...

Getty
Show Hide image

The New Times: Brexit, globalisation, the crisis in Labour and the future of the left

With essays by David Miliband, Paul Mason, John Harris, Lisa Nandy, Vince Cable and more.

Once again the “new times” are associated with the ascendancy of the right. The financial crash of 2007-2008 – and the Great Recession and sovereign debt crises that were a consequence of it – were meant to have marked the end of an era of runaway “turbocapitalism”. It never came close to happening. The crash was a crisis of capitalism but not the crisis of capitalism. As Lenin observed, there is “no such thing as an absolutely hopeless situation” for capitalism, and so we discovered again. Instead, the greatest burden of the period of fiscal retrenchment that followed the crash was carried by the poorest in society, those most directly affected by austerity, and this in turn has contributed to a deepening distrust of elites and a wider crisis of governance.

Where are we now and in which direction are we heading?

Some of the contributors to this special issue believe that we have reached the end of the “neoliberal” era. I am more sceptical. In any event, the end of neoliberalism, however you define it, will not lead to a social-democratic revival: it looks as if, in many Western countries, we are entering an age in which centre-left parties cannot form ruling majorities, having leaked support to nationalists, populists and more radical alternatives.

Certainly the British Labour Party, riven by a war between its parliamentary representatives and much of its membership, is in a critical condition. At the same time, Jeremy Corbyn’s leadership has inspired a remarkable re-engagement with left-wing politics, even as his party slumps in the polls. His own views may seem frozen in time, but hundreds of thousands of people, many of them young graduates, have responded to his anti-austerity rhetoric, his candour and his shambolic, unspun style.

The EU referendum, in which as much as one-third of Labour supporters voted for Brexit, exposed another chasm in Labour – this time between educated metropolitan liberals and the more socially conservative white working class on whose loyalty the party has long depended. This no longer looks like a viable election-winning coalition, especially after the collapse of Labour in Scotland and the concomitant rise of nationalism in England.

In Marxism Today’s “New Times” issue of October 1988, Stuart Hall wrote: “The left seems not just displaced by Thatcherism, but disabled, flattened, becalmed by the very prospect of change; afraid of rooting itself in ‘the new’ and unable to make the leap of imagination required to engage the future.” Something similar could be said of the left today as it confronts Brexit, the disunities within the United Kingdom, and, in Theresa May, a prime minister who has indicated that she might be prepared to break with the orthodoxies of the past three decades.

The Labour leadership contest between Corbyn and Owen Smith was largely an exercise in nostalgia, both candidates seeking to revive policies that defined an era of mass production and working-class solidarity when Labour was strong. On matters such as immigration, digital disruption, the new gig economy or the power of networks, they had little to say. They proposed a politics of opposition – against austerity, against grammar schools. But what were they for? Neither man seemed capable of embracing the “leading edge of change” or of making the imaginative leap necessary to engage the future.

So is there a politics of the left that will allow us to ride with the currents of these turbulent “new times” and thus shape rather than be flattened by them? Over the next 34 pages 18 writers, offering many perspectives, attempt to answer this and related questions as they analyse the forces shaping a world in which power is shifting to the East, wars rage unchecked in the Middle East, refugees drown en masse in the Mediterranean, technology is outstripping our capacity to understand it, and globalisation begins to fragment.

— Jason Cowley, Editor 

Tom Kibasi on what the left fails to see

Philip Collins on why it's time for Labour to end its crisis

John Harris on why Labour is losing its heartland

Lisa Nandy on how Labour has been halted and hollowed out

David Runciman on networks and the digital revolution

John Gray on why the right, not the left, has grasped the new times

Mariana Mazzucato on why it's time for progressives to rethink capitalism

Robert Ford on why the left must reckon with the anger of those left behind

Ros Wynne-Jones on the people who need a Labour government most

Gary Gerstle on Corbyn, Sanders and the populist surge

Nick Pearce on why the left is haunted by the ghosts of the 1930s

Paul Mason on why the left must be ready to cause a commotion

Neal Lawson on what the new, 21st-century left needs now

Charles Leadbeater explains why we are all existentialists now

John Bew mourns the lost left

Marc Stears on why democracy is a long, hard, slow business

Vince Cable on how a financial crisis empowered the right

David Miliband on why the left needs to move forward, not back

This article first appeared in the 22 September 2016 issue of the New Statesman, The New Times