The year 2008 brought the United States and the world to a
place that has not been seen since the 1930’s.
The financial industry completely turned on its head during that year as
the world watched in horror at the magnitude of the drops in the world stock
markets. Falls like this had not been
felt since the 1930’s which culminated in the worst economic depression the
world had ever seen. In 2008, Barack
Obama was elected president to serve over this crisis. The public had elected him by a wide margin
in hopes that he would fix the economic system of the United States much like
Roosevelt had done in 1932. They hoped
that he would improve the prospects of those whose lives were greatly affected
by the financial crisis. Since his
election though, many of his supporters have become disheartened with his
policies and have felt that he has not done enough to improve the economic
system of the United States and improve the situation of the middle
classes.
Many
books about the financial crisis have been written since Obama was elected
president in 2008. There has been an
upsurge in economics books written by the so called “New Keynesians” who argue
for a return to the economic policies promoted by the economist John Maynard
Keynes. These policies were largely
followed by President Roosevelt and the presidents who followed him. Keynes argued that the government could be a
great factor in promoting the economy especially in times of crisis. These economists, such as Paul Krugman and
Joseph Stiglitz, believe that in order to improve the economy the government
must take a much more active role in the economy in order to create employment
and create more financial regulations in order to stop the types of risky
behavior that was undertaken by large financial institutions which were the
cause of the crisis. Since becoming
president Obama has given some lip-service to these ideas but he has not
aggressively tried to promote new regulations.
This has led to many on the left to become discontent with Obama and
believe that he has not lived up to his campaign promises. Many hoped Obama would be another Roosevelt,
whereas now many believe that his economic policies do not differ much from
Bill Clinton’s or even George W. Bush’s.
However,
the reason Obama has not taken a similar path to Roosevelt does not lie with
Obama himself. It lies with the
different historical circumstances that each one of these men faced during
their terms as president. The worlds in
which Obama and Roosevelt took over were very different and they affected the
ways that they acted as president.
When
Franklin D. Roosevelt was elected in 1932, the country was suffering from its
worst economic depression ever. In 1929,
the Stock Market had its greatest crash ever and things continued to worsen for
the United States. Banks began to fail
and unemployment soared. In addition to
this, the Midwestern agricultural regions experienced terrible dust storms
which forced thousands to lose their livelihoods. After being elected Roosevelt immediately took
action. He wanted the people to know
that under his tenure the government was going to take radical action to try
and fix the economy. He created a set of
plans known as the New Deal. These plans
included regulating the banks, putting people back to work with government
agencies, and providing a social safety net for those who could not support
themselves. In short Roosevelt summed up
his plans as “Relief, Recovery, and Reform”.
Not only did these plans prove to be immensely popular with the public,
but they put the United States on the path to great success. These economic policies coupled with the
United States victory in World War II led the United States to have great
domestic and international economic success in the two decades following the
Second World War.
So if
Roosevelt’s policies seemed to be so effective why has Obama not followed the
same path? The answer lies with the
different worlds in which each of the presidents lived in. Roosevelt became president a little over a
decade after the most destructive conflict the world had ever seen to that
point in World War I. One of the most
significant results of the First World War was the establishment of the Soviet
Union. World War I had completely
destroyed the Russian economy and eventually led to the Russian
Revolution. After a series of power
battles in 1917, the Communists emerged victorious. The Communists were committed to a much
different type of economic system. They
were completely dedicated to the overthrow of the Capitalist system. In the Soviet Union all private property was
seized by the state and the country was thrown into a period of forced
industrialization. Although these
policies resulted in the deaths of millions due to forced starvation and
massive imprisonments, for the surviving populations it created something that
millions in the United States (and in the rest of the world) wanted desperately
during the Great Depression: full employment.
After
the Russian Revolution the idea of communism spread rapidly to countries all
over the world. Almost all countries
developed strong Communist Parties which were committed to starting revolutions
in their countries to overthrow the capitalist system. The United States was not immune to
this. The American Communist Party
became a large force in American society during the Great Depression. Communists got involved the struggle for
racial equality, workers unions, and held massive political meetings. In addition to the Communist Party, the
United States had two other leftward factions during the Great Depression. The first was Socialist Party which had
existed in the United States since the early 20th century. The Socialists argued for a similar economic
program as the Communists but they generally wanted to go about it more
gradually. The Socialist Party candidate
for president in 1932, Norman Thomas, garnered almost a million votes. Lastly, the 1930’s was a period of great
unionization in the United States. Labor
unions, began to organize much more aggressively during the depression and they
began conducted large scale strike actions.
Many who worked in labor unions became radicalized by the ideas of
Socialism and Communism and urged workers to take more aggressive strike actions.
These
three factions of American society put a tremendous amount of pressure on
Roosevelt. During the years of the
1930’s Roosevelt saw the type of class conflict that was starting in Europe and
that beginning in the United States.
Communism had already a major victory in Russia and had significant
impact in many of the countries of continental Europe. Roosevelt knew that if he did not act to
address the economic problems of the United States many more would turn to the
ideas of communism and they might have more chance of creating a successful
revolution in the United States. So
because of this, Roosevelt chose to follow the ideas of Keynes and try to use
government intervention in order to save the capitalist system of the United
States.
That
brings us to the presidency of Obama. Since
the 1980’s the ideas of Keynes have gone largely out of favor in
economics. Many economists during this
time began to believe in the ideas of the Chicago School of Economics which
believes in a laissez-faire economy where the government takes a little of a
role as possible. This type of economic
thinking has led to enormous prosperity in some cases but it also played a
great role in the current economic crisis.
Since the government took no action to regulate the practices of banks
and Wall Street Investment firms, they began to take larger and larger risks to
make great profits. In many cases these
risks paid off during the economic booms of the 1990s and from 2002-2007. However, it also has led to more frequent
economic crashes, the most severe of which is continuing now.
Obama,
like his predecessors cannot help but have been influenced by these
ideologies. The Democratic Party has
largely followed a plan of deregulation and less government intervention since
the 1990s. When Obama was elected he
appointed Larry Summers to lead his economic recovery team. Summers served as Secretary of the Treasury
under former President Clinton, and is a great champion of deregulation and
less government.
In
addition to this, there is no major competing vision for the economies of the
world now. With the exception of Cuba,
Communism is no longer practiced in any countries of the world.[1] All governments around the world during the
1990s began to believe that capitalism was the only economic system which should
be followed. Because of this, Obama does
not feel the same pressure that FDR felt because there is no country that
others can look to as an alternative. In
addition to the lack of any strong leftwing alternatives in the United States,
labor unions have become much weaker. They
no longer have the strength that they once had and in some states unions are
almost non-existent.
Lastly,
the world has become a much different place in the last 30 years. The phenomenon known as globalization has
created massive multi-national corporations, many of which are in the financial
industry. Although there were these
types of firms during Roosevelt’s day, they did not have the same type of
global reach and wealth as they do today.
Obama won his election largely with the help of corporations such as
Goldman Sachs and JP Morgan and Company.
However, even the talk of reform of the financial industry has led some
such as Jaime Dimon, CEO of JP Morgan, to publicly disagree with Obama, and has
led others such as Goldman Sachs to begin supporting Mitt Romney in 2012. In today’s world, a President of the United
States just cannot survive without the assistance of multi-national
corporations.
In
closing there is no reason why Obama would or even should for that matter
follow the same types of policies of FDR. If he goes that route it will inevitably lead
to him undoubtedly being a one term president and probably lead to him being
crucified by a great number of the U.S. media outlets. History has shown that leaders only try to
embark on economic policies that attempt to create greater equality when they
are faced with the possibility of their current system being overthrown by an
alternative. Without that alternative
now, there is little chance of any great change in the United States.
[1] It
should be added that even Communist Cuba has been considered many capitalist
reforms and more many years has been running a very successful international
tourist business.
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