Monday, March 30, 2009

Is Barack Obama the Bob Rae of the United States?

It may seem a preposterous proposition but the political perils in the path of Barack Obama are remarkably similar to the hazards that Bob Rae confronted during his years as an NDP premier of Ontario.

Obama is in power during a period of deep economic crisis just as Bob Rae was in the early 1990s. Both leaders were swept into office by electorates that wanted to be rid of the old ways of doing things and were seeking a new and progressive way forward.

It’s hard to recall this so many years later, but when Bob Rae brought the NDP to power in September 1990, there was a surge of hope in the province. The new premier literally threw open the doors at Queen’s Park and invited everyone into the Ontario legislative building for a vast party. Rae’s job approval ratings surged so that when his face showed up on the giant screen at the Sky Dome at a Blue Jays game, the crowd cheered.

Rae was an articulate, personable young man who told people the truth in ways so different from the obfuscations of the Tories and the tortuous rhetoric the Liberals offered to defend the scandal-ridden government of David Peterson.

The great question for both Rae and Obama when they were elected was this: on whose behalf would they govern?

On the night the NDP was elected, September 6,1990, Bob Rae told a jubilant crowd that he would govern on behalf of all Ontarians. He was making a fateful choice. He was reaching out to the business community in the province and making it known that he wanted the approbation of both small and big business. From day one, Rae was shifting away from the NDP platform which included such reforms as the creation of a system of public auto insurance of the kind that had been implemented in Western Canada by social democratic governments.

During a very difficult recession, Rae was trying to migrate to the political centre, a space which would allow him to expand his left-wing political base. Over his years in power, Rae tried a great many things to make this work. He brought in labour reforms that banned strike breaking and eased the path for the formation of unions. His government established an employment equity commission in 1991 and two years later it introduced affirmative action to increase the numbers of women, aboriginals, non-whites and disabled persons in the public sector.

Rae’s government tried initially to sustain public spending to protect Ontarians from the recession and then did a U-Turn, drastically slashing spending to control the deficit. It ditched the plan to establish public auto insurance on the grounds that the economic climate was too negative and that the move would result in reduced employment in the insurance industry. In 1993, the government introduced its notorious Social Contract, which re-opened public sector contracts, froze the salaries of public sector employees and imposed “Rae Days”, unpaid days off for public employees which amounted to pay cuts. Key trade union leaders denounced the Social Contract as a betrayal.

Much of labour was furious with Bob Rae. The people who made up the NDP’s left-wing political base were disillusioned. And at the end of it all, despite his years of courting business, the business leaders prepared to support Rae could have assembled in a telephone booth. What Bob Rae did was to stake out a position in the political centre to which no one wanted to go, neither left nor right. From “dead centre”, Rae led his party into the 1995 election and political oblivion. The NDP fell to seventeen seats and third place in the Ontario legislature, its vote percentage falling from 37.6 in 1990 to 20 in 1995.

What about Barack Obama? Is he en route to becoming a “dead centre” centrist?

Hopefully not, but the danger signs are there. On a political stage much vaster than the one Bob Rae stood on, Barack Obama generated hope and the promise of change among millions of Americans including African Americans, Latinos, the young and the well-educated. He won a sweeping political victory, recasting the political map of the United States in the process.

From the beginning, Barack Obama campaigned as a centrist, promising to govern on behalf of all Americans and pledging to purge Washington of its poisonous partisanship. Working with Republicans was a key part of Obama’s political agenda from the outset.

At the time of his electoral victory, Barack Obama’s base of political support was wider than that of Bob Rae and its make-up differed in important ways. In addition to a wide swath of working class support, especially among African Americans and Latinos, Obama enjoyed considerable backing from highly educated and wealthy white voters. He also had sizeable support from elements of the business community including that of much of Wall Street. Needless to say, Bob Rae was not backed by Bay Street. It’s noteworthy that Obama’s voting base was quite different from that of Franklin D. Roosevelt during the New Deal years of the 1930s. FDR enjoyed a more solid white working class vote, backing from white segregationists in the South, a large farmer vote, but less backing from the top ranks of American business.

How does Obama make his coalition work? Does he lean in favour of the wage and salary earners in his base or does he pay heed to his Wall Street backers?

Obama ran on a program that promised broad change, including a health care plan (not universal medicare) that would ensure that every American has coverage, and an environmental policy that would bring the United States into the fight against climate change and that would reduce American dependence on imported petroleum. He also pledged, rather vaguely, to overhaul the American educational system to provide high quality education for all students. On taxes, he promised tax cuts for 95 per cent of income earners and modest tax increases for the top 5 per cent.

Hope was the central message, but whose hopes would be realized, and at whose expense? That was kept deliberately unclear in the Obama message.

Just over two months after Obama was sworn into office, the United States is seething with populist rage. Storm clouds have been forming ever since the bailouts of financial firms began in the fall. What caused the maelstrom to burst were payments of bonuses totaling $165 million to executives of the American International Group (AIG) a couple of weeks ago, in the wake of Washington’s massive bailout of AIG which cost more than $170 billion. Everywhere across the country, ordinary Americans were furious. With rising anxiety, they had numbly accepted the vast Wall Street bailouts, and the talk of trillions more dollars needed to get the financial sector and the auto industry back in business. But the idea of the bozos who had presided over the AIG plunge into toxicity receiving handouts of a million dollars each, and in some cases more, blew the lid off.

I was in California when the hurricane hit. On television, on the front pages of papers in small and large cities, in conversations in cafes, the fury was everywhere. CNN covered a busload of working people, some of them political activists, going on a tour of the palatial homes owned by AIG executives, to deliver the message to the doorstep that they were angry. They were met by security guards who halted them and so they delivered their message to the Pinkerton police. CNN titled the segment “The Lives of the Rich and Shameless.”

I couldn’t believe the difference in tone when I got back to Canada. There is plenty of anger among those losing jobs here, but since Michael Ignatieff killed the Liberal-NDP coalition and lined up with Stephen Harper on the budget the lid has been on. In Canada, so far, the anger is subterranean, more sullen than overt. And the Canadian media is about as populist as a wet firecracker.

American populism extends from left to right. As has been the case for decades, when it rears its head, populism can be anti-capitalist one moment, then racist. It can demand fairness for all one day, and can recoil in fury against the guy next door who is living on the dole the next. During the Great Depression of the 1930s, populism showed up under the banner of the Congress of Industrial Organizations (CIO), with its drive to unionize industrial workers, that of Louisiana’s Huey Long, as well as that of the fascistic Father Charles Coughlin. And Coughlin was adept at sounding ultra radical as when he urged his audience to “attack and overpower the enemy of financial slavery.”

The problem for Obama is that many of his top officials are in bed with Wall Street. Treasury Secretary Timothy Geithner, to name one prominent case, has been a Wall Street enabler for years. Mentored by Clinton era Treasury Secretaries, Robert Rubin and Lawrence Summers, Geithner was named president of the Federal Reserve Bank of New York in 2003. He was critically involved in the sale of Bear Stearns, in the bailout of AIG and the decision to let Lehman Brothers go down.

He was the principal architect of the Obama administration’s recent move to partner up with the private sector to buy up the toxic assets of Wall Street financial firms. The move, which was wildly popular on Wall Street, sparked a major stock market rally.

Let’s be clear about one thing. While right-wing populist ranters such as Rush Limbaugh salivate about the evils of big government, there is nothing big financial firms and other top corporations love more than handouts of tax dollars to them. The Obama administration’s policy toward the financial sector, so far at least, has been to shovel out the money while leaving the private bankers in charge. The president is so afraid of nationalizing the banks, a policy favoured by economist and New York Times columnist Paul Krugman among others, that he is willing to run the risk of putting Wall Street back in the driver’s seat while leaving the tax payers stuck with a mountain of bad debts.

The same thing is almost certain to happen with the auto industry. While Obama was smart enough to offer up the head of GM’s Chief Executive Officer Rick Wagoner on a platter before he bails out General Motors and Chrysler, it will be the workers and the retired auto workers who are going to pay the real price in lost jobs, devastated communities, lower pay, and lower pensions. The president insists, as in the case of the financial sector, that Washington doesn’t want to run the auto companies. What that means is that the workers and the tax payers will shoulder the burden and the private owners will be put back on the road to profitability and riches.

Barack Obama’s much touted promise to transcend the partisan divide forced his administration to cut $80 billion from his economic stimulus package. The cuts came in plans to spend money on school construction, on aid to the unemployed to maintain their health care and in the provision of food stamps, among other things. In return for these cuts to his plan, the president failed to win the support of a signal Republican in the House of Representatives, and wound up with the backing of only a handful of Republican Senators.

An exceptionally skilled communicator, Barack Obama is well aware of the anger now felt by Americans. He knows this anger could provide fuel for him to make basic, progressive reforms. But he is well aware that the anger could invigorate the Republicans and energize them for a populist, anti-Big Government, pro-tax cutting run in the midterm Congressional elections in 2010.

Barack Obama is trying to stay right in the centre, just where Bob Rae tried to stay. He could pull it off. But his constant yielding to Wall Street, and his fear of being labeled a foe of free enterprise is making him pay a huge price, both in the nature of the stimulus and bailouts he is offering, as well as in putting on hold programs to help ordinary Americans with the health-care, education, housing, reconstruction of cities, and provision of jobs they so desperately need.

Let’s hope he doesn’t end up in “dead centre” in the way Bob Rae did.

Friday, March 27, 2009

Australia: Canada’s Antipodean Twin

Canada’s twin---the two were parted at birth---is Australia. Like all permanently separated twins, living very far apart, the differences between them are enormous. In Australia’s night sky, you see the Southern Cross, which Canadians never see, while Canadians look up at the Great Dipper and the North Star, which is never visible to Australians. In Australia, the sun always moves to the left in the sky and in Canada it always moves to the right. That said, the twins share striking similarities.

Canada and Australia were established as settler colonies whose founding populations occupied territories that had been the homelands of aboriginal peoples for thousands of years, in the case of Australia for about forty thousand years, in the case of Canada for ten or twelve thousand years. French settlement in what is now Canada began in the early 17th century. Permanent British settlement in Australia commenced in the late 18th century. And while the conflict between France and Britain for control of Canada and the permanent fact of English and French populations were a defining feature of Canadian existence, both countries came of age as continent-spanning enterprises during the Victorian age at the height of British imperial power. In downtown Toronto, Sydney and Melbourne, Victorian British street names---King, Queen, Albert, Wellington, York etc.---enjoy pride of place.

Sparsely populated countries with large diverse sophisticated cities, Australia and Canada are advanced nations that rely enormously on their role as commodity producers that export their products to other countries. For over a century, the two countries have been rivals in the production of wheat and other grains to meet the demands of global markets for these commodities. Times of high prices have been a boon to farmers in Manitoba, Saskatchewan and Alberta, as well as in South Australia, Victoria and New South Wales. Similarly when prices fall, farmers in these regions, though they are separated by thousands of kilometers, have suffered simultaneously.

Australia and Canada share a history of making enormous public investments to construct roads, railways, other infrastructure, and educational facilities in regions whose economies are devoted to farming, as well as to the extraction of coal, iron ore, uranium and other resources for export markets. The public in both countries has been saddled with the high fixed costs that go with expenditures to support primary products industries. When commodity markets boom, Australia and Canada prosper. When commodity markets go bust as they have during the present economic crisis, their economies suffer. The rise and fall of external demand for products from minerals to wheat and the changing technology that affects the value of specific commodities is a major source of economic vulnerability in Australia and Canada.

In the early years of the 21st century, Australia and Canada are respectively the hot and cold twins and the dry and wet twins. Both countries are highly vulnerable to the threat of climate change although in quite different ways.

Much of Australia, especially the south and southeastern states of South Australia and Victoria and much of Western Australia have experienced a severe drought for many years. Adelaide, the fine English style city that is the capital of South Australia, was parched when I visited in February 2009. The Barossa Valley, just north of the city, is one of Australia’s most prestigious wine producing regions. When I toured it by bus, the vineyards were sparkling green thanks to massive irrigation efforts. But the surrounding countryside was brown and dry, with the beds of streams completely dry and rivers reduced to a trickle. Our guide spoke continually about the rising threat to wildlife and human activities as a consequence of the drought. Later on a tour through the Grampian Mountains and along the Great Ocean Road in the State of Victoria, the consequences of drought and of fire, its dark companion, were even more starkly apparent. A couple of weeks earlier over two hundred people had died in the terrible fires in Victoria in the worst natural disaster in the history of Australia. Without being too apocalyptic about it, the viability of heavily populated regions of Australia is at stake as a consequence of potential long-term shortages of water and the threat of climate change.

While Canada’s supply of fresh water is much more ample than Australia’s, there are important regional exceptions. The western prairies have been afflicted with major droughts. The massive use of fresh water in the process of producing synthetic crude oil in the Alberta oil sands poses a threat to the supply of water available to meet the needs of agriculture, industries and cities.

The oil sands, it should be noted, are the largest source of green house gas emissions in Canada. In that sense, Canada’s oil sands emissions add to the greenhouse effect that is generating climate change, not least in Australia as well as in Canada’s north, where temperatures have been rising with dire consequences for the wildlife of the region.

The global markets for Australian and Canadian commodities plunged in 2008 and the currencies of both countries dropped appreciably against the U.S. dollar. Australia and Canada rode high during the commodity boom, especially Canada, whose oil industry roared ahead as the price of oil peaked in July 2008. Given the structures of their economies, with their dependence on commodity exports, both countries waited anxiously for the return to economic health of the countries that were home to their export markets.

The conundrum of Canadians and Australians is that of prosperous peoples with plenty of capital of their own in a world that is entering a new age. Do these countries that have served as suppliers of primary products for others have to remain in that role in the future? In a time when the key to the future is development that is sustainable, can other options open for these peoples?

It would make a good deal of sense for Canadians and Australians who are thinking about the crash and its aftermath to consider these questions together. The similarities and differences between Australia and Canada should provoke sparks of insight helpful to these long separated twins.

Tuesday, March 10, 2009

After the Crash: A Time for New Bearings

A world age ended with the Great Crash in the autumn of 2008.

We live in a time when technology and science have given people in the rich countries the sense that, serious crises aside, things will go on as before, and life may even improve if technology, science and common sense are permitted to have their way. For Canadians, who last saw their world torn apart, and paid in blood with tens of thousands of soldiers killed, in the 1940s, the past sixty years, on the whole, has been a comfortable time. Over these decades, to be sure, there have been booms and recessions, natural disasters, human tragedies such as the Air India bombing in 1985, the ugly loss of Canadian lives in Afghanistan and the near division of the country in the Quebec referendum of 1995. But on the whole, Canadians have been traversing one of the sunny uplands of history. For most of us, this experience has given us our bearings for navigating the world.

Now it's time for us to acquire new bearings. A world age has ended, which is something that happens more often than Canadians generally think. While there have been some long periods of time in which life went on much as before and the great questions appeared to have been answered---the Roman Empire, for instance, during the second and third centuries A.D.---shock and transformation have been the regular accompaniments of human existence. Think of the fall of Carthage or the peoples of the Americas undergoing European conquest and you are on the way to conceiving of human existence as rife with swift change and destruction.

The age that ended in the autumn of 2008 was the American-centred age of globalization. That age had been a long time in the making. It had taken shape as a consequence of the interactions of forces of different durations. A central narrative in its construction was capitalism, technology and science. Another narrative, closely associated with the first, was the rise of the United States and the American Empire to the zenith of global power, an achievement fully realized in the decades following the Second World War, and consummated in triumph with the collapse of the Soviet Union and its empire between 1989 and 1991. A third narrative, more limited in time, was the methods and practices of capitalism over the past thirty years, a time of global markets, de-regulation, and neo-liberal ideology.

Not without an element of perverse humour has been the launching of schools of business on university campuses around the world in recent decades that are dedicated to training business executives, economists and accountants imbued with the propositions of neo-liberalism. These propositions have played a not insignificant role in driving the world economy over the precipice. The hundreds of thousands of graduates of these business schools now must make their way in the world equipped with notions about economics that have as little explanatory value as Ptolemaic astronomy, Thomist theology, or King Canute's ideas about the workings of the tides.

While human beings are adaptive creatures, otherwise they would not have survived, they also have a remarkable capacity for rigidity, stubbornness and a ferocious attachment to ideas that are no longer useful. One of the benefits, perhaps dubious, of civilization is that provided there is a sufficient surplus for some to live off the labour of others, institutions, organizations, temples, churches and political parties devoted to keeping alive useless and counter-productive schools of thought can exist. They can even thrive. During difficult times, the attraction to the occult, to the reassurance of fundamentalist simplicities, and to wacky new age fantasies is very great.

In the political sphere, the pull to the irrational can also be very strong. Take for instance the case of the Republican Party in the United States. Having led the United States into unsustainable current account and government deficits, wars that have become quagmires, and the ballooning of the housing bubble that has now burst, one might have anticipated reflection and rethinking among influential party leaders.

Exactly the opposite has occurred. Talk radio powerhouse Rush Limbaugh, a man who proudly denies that human activities have caused global warming, has become the party's leading figure. In his bombastic, bullying manner, he is unashamed to proclaim that he hopes President Barack Obama fails. Limbaugh and less extreme Republican leaders have responded to the global financial crisis with a return to the old verities. Instead of generating stimulus through direct government spending on infrastructure, transit systems, refitting homes for energy efficiency, education and health care to offset the descent into depression, the Republicans favour tax cuts and cuts to government programs, the very recipe that fostered the economic crisis in the first place. Small government remains their cherished ideal even though it was the Republicans who insisted on gigantic military budgets, trillion dollar wars, and an agenda that made the super rich grow richer while the rest of the population faced rising debt and income stagnation. The Republicans contributed greatly to breaking the system that made their backers wealthy and helped ring down the curtain on a world age. This monumental failure, however, has not prevented the Republicans from calling for more of what did not work.

Over the past month, those who believed that this sharp crisis would soon give way to an early recovery have been shown to have been profoundly wrong. As it turns out, neo-liberalism, a system designed to reap the surplus from production the world over for a tiny minority of the population, impregnated the global economy with worm holes of debt that lead everywhere. The full extent of these multi-trillion dollar forms of indebtedness is not yet known, indeed in the case of derivatives, it is unknowable.

Bailing out a system that has rotted from within may be undoable, even with the brilliant and effective Barack Obama at the helm of the Titanic.

A new world age has begun. Canadians continue to be led by politicians who have remarkably little inkling that everything has changed. It should be noted that for the past couple of decades, Canadian politicians have not made any basic decisions about the economy. All they’ve done is to administer the neo-liberal system on behalf of those who have been running it. It’s not easy for such people to deal with the prospect that they might have some real decisions to make in the future.

We need new bearings to cope with a new world. Then we can rid ourselves of the political leadership we have had so we can construct a new and sustainable Canadian economy, with different rules about the distribution of rewards that can endure in a new age.