US economic crisis is good luck for Obama

Published in The Daily Star, October 18, 2008

THE US economy is in its worst crisis after many decades, sending shock waves round the world while turning the country itself upside down. Even the US$700 billion bailout package signed into law recently by the US President is being considered not enough to bring the US economy back on rails as people are losing houses, businesses and jobs. So far this year, 750,000 people in USA have lost their jobs. Europe too is in turmoil, and in UK the government has followed the US example and announced an 80 billion pounds bailout package. The IMF boss Strauss Kahn has said: "Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown."

At the centre of it all should have been George Bush who has supervised this economic downturn but whose good fortune is that he is now a lame duck President and it would serve no useful purpose to unleash any wrath upon him. But history will not spare him as he will be leaving office as the most unpopular President in US history. At the time of writing this, President Bush's approval rating is an abysmal 24%.

Analysts are giving many reasons to explain this worst economic crisis in US history. The Republicans' faith in de-regulation that has allowed the big financial institutions and businesses' to fulfill their greed is one major reason being put forward to explain this calamity. Another reason also coming into the equation is the connection between this economic downturn and the ill-conceived decision to go to Iraq in pursuance of President Bush's war on terror. This is a dangerous mix for McCain as it brings to question the legitimacy of the Iraq war to explain the economic miseries and uncertainty affecting US citizens in the main street.

It is also bringing back to their memories the infamous claim of President Bush in May of 2003 that the war in Iraq was over aboard one of US's aircraft carriers. It was far from that for, by then, the US Government had just started to bleed both in terms of the billions of dollars that would go to Iraq as well as lives that would be lost. In a report in August 2008, the Congressional Research Service (CRS) revealed that the real similarity between Iraq and Vietnam has been in the price of staying. In constant FY2008 dollars, the Vietnam War cost the US $686 billion in 10 years (The actual cost of staying there was US $ 111 billion). The Iraq war, at just over five years old, had cost US $ 648 billion. The amount is close to the bailout package that the US Government has just announced for its economic recovery. The CRS assessment does not give the full picture though. Noble Prize winning economist Joseph Stiglitz of Columbia University in his book “Three Trillion Dollar War” has said that the Iraq war would ultimately cost USA US$ 3 trillion when such costs as lifetime disability and healthcare for troops injured in the conflict as well as the impact on the US economy was considered. In terms of human lives, the US has so far lost over 4000 of its men and women in Iraq while many more times that number of innocent Iraqis have lost their lives as a consequence of the US decision to invade Iraq.

The US went to Iraq to destroy Saddam's WMD program that, according to US intelligence posed a threat to US security in the context of President Bush's war on terror. Subsequently, it has been proven that Iraq's WMD program had ceased long before the Iraq war. Another reason for the Iraq war was to take control over Iraq's huge oil reserve to assure US's energy needs. Instead, the Iraq war pushed oil prices from around US$ 30 a barrel to nearly US$ 150 in July this year (before falling to about US $ 80 a barrel after the 700 billion dollars bailout package by the USA caused worldwide panic). The benefit of it all went to oil rich Middle Eastern countries with strong links to the elder President Bush and oil merchants in the USA, many of whom have close links to President Bush. While these countries - oil merchants and oil lobbyists - became richer by windfall gains, the rising price of oil adversely affected all sectors of the US economy that the US administration, driven by the greed of their supporters in the Wall Street and a pliant and Republican-dominated Congress (the equation changed only after the 2006 elections), overlooked. In fact, in July after the failure of Indymac Bank, Treasury Secretary Paulsen reassured the US public by saying: “it's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.” In August, he said the government had no plans to inject capital into the Federal National Mortgage Association, nicknamed Fannie Mae and the Federal Home Mortgage Corproation, nick named Freddie Mac. In September, both were nationalized, a most unusual step that underscores the depths to which the US economy has fallen. The US Congress woke up late to what the US Administration had done to the economy and voted down the first bailout package that favoured those in the Wall Street till the interests of average Americans in the main street were guaranteed in the second US$ 700 billion bailout package, whose fate and impact on reviving the economy is still in doubt.

All of this has come to the assistance of the Democrat candidate Barak Obama. Even around the first Presidential debate, Obama and McCain were going neck to neck. At that time, the elections seemed to be a referendum on whether US is ready enough to elect its first black President. Now the election has become a referendum on whether the people of the United States can again hand their country to the Republicans and their faith in deregulation, together with their strong ties to those in the Wall Street who have brought the US economy to its knees by their greed. A Newsweek Poll this week showed Obama leading 52% to 41%. A similar poll a month ago tied the two candidates at 46%

At the beginning of the year, the legitimacy of the Iraq war was a major issue in the US presidential election together with the economy. The improvement of ground conditions in Iraq under General Petraeus, the head of Multinational Forces in Iraq, looked like taking away a big vote winner for the Democrats as the Iraq war began to fade out as an asset against the Republicans. Now the economic quagmire into which the US has fallen has made the Iraq war return back to the political centre stage to haunt the Republican Party and the fortunes of McCain in a different but dangerous way. The Newsweek poll referred to earlier in this piece has shown 86% of the voters are dissatisfied with the way things are going in the US, based on the faltering economy that has come close to stealing the great American dream of a house and a steady job away from the average American. It is now up to Obama and his spin doctors to link the Iraq war to the faltering economy and extend that to the faith of the Republican Party in de-regulation and its links to big business and financial institutions and their greed as nails in the coffin to explain the reasons for US' current precarious economic plight. The Presidential debates and Palin's current plight over the report that she abused power while being Governor of Alaska, the so-called “Troopergate” scandal, are also helping Obama's candidature. As these developments articulate themselves the way they seem to be doing, the US may after all get over the colour of Obama that has been hanging like a dark cloud over his candidature and send him to the White House.

The writer is former Bangladesh Ambassador to Japan and at present Director, Centre for Foreign Affairs Studies. He can be reached at serajul@cfasonline.org.