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COLUMN

Obama: Challenges and consequences

IFTY ISLAM
So history has been made. While the date "9/11” when the Twin Towers were toppled has loomed large in both the American psyche and the Bush Legacy, ‘.‘4/11/08’’ is in many ways an equally seminal event. The landslide election of Barack Obama to be America's first African-American President is the reassertion of the United States position as the Land of Opportunity and caps the Civil Rights Struggles from the abolition of slavery to the segregation battles of the 50s and 60s led by Reverand Martin Luther King. It is also likely to mark the beginnings of a rehabilitation of America’s image and role that had been so badly damaged by President Bush's disastrous war in Iraq. As Tristram Hut, a British historian, put it: Mr. Obama "brings the narrative that everyone wants to return to - - that America is the land of extraordinary opportunity and possibility, where miracles happen."
But amid the euphoria manifested by joyous celebrations in many streets in America all the way to stock-market rallies around the globe, President-elect Obama perhaps faces the most challenging set of problems that any person elected to the highest office in the United States and undoubtedly the world has ever faced. This was a fact he himself acknowledged in his victory speech where he stated that: "Even as we celebrate tonight, we know the challenges that tomorrow will bring are the greatest of our lifetime -- two wars, a planet in peril, the worst financial crisis in a century.. .There is new energy to harness and new jobs to be created; new schools to build and threats to meet and alliances to repair."
The rally in equity markets is unlikely to be sustained until we see some light at the end of the tunnel for the financial meltdown that has tipped the global economy into recession. It is worth noting the most recent analysis of the global outlook from JPMorgan Chase, once among the most bullish of analysts, expects shrinkage this quarter at an annualised rate of 4 per cent in the US, 3 per cent in the UK and 2 per cent in the eurozone. It is forecasting 0.4 per cent global growth in 2009, with
advanced countries shrinking 0.5 per cent and emerging ones growing 4.2 per cent. As Martin Wolf, the Chief Economics Commentator of the Financial Times notes: "Given the near-disintegration of the western world's banking system, the flight to safe assets, the tightening of credit to the real economy, collapsing equity prices, turmoil on currency markets, continued steep declines in house prices, rapid withdrawal of funds from hedge funds and ongoing collapse of the so-called “shadow banking system”, these forecasts even look quite optimistic. The outcome next year could be far worse.”
So how might President Obama turn the US economy around? About three weeks ago, as the crises deepened and financial markets reeled, Obama increased the proposed cost of his “middle-class rescue plan" to $175 billion from $115 billion. Rising Democratic power in Washington is likely to usher in a drive for tighter financial regulation, increased social spending and more labor-friendly policies amid a more challenging climate for business. As the government looks for money to pay for the financial rescue and goals such as a healthcare overhaul, the cash-rich oil industry could be an easy target.
It might be argued that bolstering battered US confidence might be a larger potential contribution from President Obama. As the WSJ has noted, taking the helm during the Great Depression, Roosevelt's first step was to shore up the confidence of the public. The 32nd president staved off a run on banks and put in place dozens of programs to stimulate the economy, create jobs, regulate the financial system, rebuild infrastructure and create a social safety net. With Obama's skill at oratory and the unflappable air he projected during the bailout vote, he could likewise send a reassuring message.
Obama must set priorities and select a few manageable goals he can accomplish quickly. A president's mandate is usually strongest at the beginning, giving him the best chance to pass his agenda and administer bitter medicine. The strong gains by the Democrats in both the House of Representatives and the Senate re-enforces his mandate.
President-elect Barack Obama is committed to a foreign policy of intense diplomatic engagement with allies and adversaries alike and an international approach to curb nuclear proliferation and terrorism. Some have expressed hope that Barack Obama will see America's place more firmly within the community of nations, engaging in what Jai Ram Ramesh, Indian State Minister for Commerce, called "genuine multilateralism and not in muscular unilateralism."
He will move to implement pledges to accelerate the US troop withdrawal from Iraq, build up American forces in Afghanistan and ask allies to play a bigger role in the fight against a resurgent Taliban, advisers say
The Iranian regime, as well as al-Qaeda leaders, may view Obama's emphasis on engagement and negotiation as a sign of faltering US resolve. So we should expect not only tough rhetoric but also action early on in an Obama Presidency. The commitment to expand the US army and the presence in Afghanistan will see little opposition. But Pakistan will remain the most volatile and challenging of America's foreign policy flashpoints.
Obama views climate change as an "epochal, man-made threat to the planet" (Foreign Affairs) and vows to lead an international coalition to reduce greenhouse gas emissions. Obama has said he will try to ensure "that our nation's environmental laws and policies balance America's need for a healthy, sustainable environment with economic growth."
So what will President Obama
mean for this country? With his renewed fight against terrorism, Bangladesh can be an example of a moderate Muslim state that has committed major resources to UN peacekeeping around the world. We should also leverage our vulnerability as one of the most Climate Change vulnerable country's to see the US make the kind of commitment to helping Bangladesh that the UK's DFID did with their GBP 75mn contribution. But his biggest single contribution is in the broader context of ensuring that the poorest in the world are not the innocent casualties of American financial excess. Bangladesh should join the rest of the world in loudly cheering the new era of President Barack Obama.
Ifty Islam is the managing partner of Asian Tiger Capital Partners and welcomes feedback at ifty islam@at-capital com