Monday, June 1, 2009

Where did Obama go wrong?

Barack Obama’s victory for the US President Election was symbolic in many fronts. He took strong stand on three major areas:
1. Improving Brand America in the World
2. Soft Diplomacy to Improve Ties with Non-Friendly Nations
3. Building American Economy with Human Face

Well, Obama taking his Pre-Presidency Rival, Hilary Clinton, as his Foreign Policy Associate was a big step. Only a very strong person and positive thinker can do it. He knew his weakness (lack of experience) very well and picked his people very wisely.

One of his best diplomacy can be seen by his play on India and Pakistan. Obama knew the power of Indian Population in US, and called Pakistan as the hub of Terrorism to lure them. He seemed smart in using the best possible way to get Indian American voters. He later quickly came with a statement on Kashmir, and this time calling US involvement in it. This got him Pakistanis as well.

Obama’s softer stand on foreign relations got him Europeans. Closing of Guantanamo Bay Prison and his open arms for friendship from rival nations like Iran and Libya got the Islamic mass too. All this did well for Obama and the Americans.

The point where Obama went wrong is on the Economy front and managing China, the emerging super-power. His Office first went wrong on blaming China for the recession, while everybody in the World knows that fault lied with America. Extended Housing Inflation, Sub-prime credit bubble, CDS Bubble, etc lead to the economic burst. China had no involvement or control on any of these factors. It was instead helping Americans to maintain high fiscal deficit; they continuously bought US bonds and even now they are continuing it.

Chinese have own interest in keeping US Economy afloat and is trying hard to help them get back to shape. Obama administration failed to appreciate that before Chinese hit them hard saying China was doing favour by believing in an Economy with huge deficit. This was a nightmare for the most powerful countrymen to hear.

On another note, US took over the political, military and economic power from Mainland European Nations after the World War II. Thanks to their geographic distance from the rivals. They lost little, and could easily command their voice to the pre-War powers. This would have remained for few years or decades only, but the quick economic reforms and forward looking inclusive governance took them far from other competitors. The reforms included privatization of most government owned companies and moves towards capitalistic and free market, including favour for outsourcing and off-shoring. Europe hesitate to take these steps, thus becoming a slow moving, low performing and happy living economy.

Successive American governments have not only favoured aggressive growth and hire-fire policy; they have let big companies fail too. This made entrepreneurs and corporate aware, active as well as responsible. They didn’t felt relaxed and become laid-back, and this culture created it as a hub of most successful companies.

Obama should have known that 2008-09 crisis is not the first crisis that happened, and it won’t be the last one too. Many crises came and ended. Obama seems to have hurried, and did too much to save the economy. His bail-out philosophy has not worked, and is still on test. Many American Corporations will now be running under the government umbrella, and many more companies will be seeking for bail-outs. This has given the corporate executives, a place to hide their face when they fail. They can surrender and can get away with another venture. It happened this time, and it won’t be easy to wipe it anytime soon.

Obama has acted hyper-actively, and wasted huge tax payers’ money. He has also made Federal Reserve to print Dollars to finance government expenditure and save dollar shortage in the international market. These steps are not risky, they are deadly. One side, it decreases the output and other side increases inflation. This might create a condition where there is too much cash, too much government role, very low productivity, very low freedom and very low responsibility on action. This might kill the performance culture of the Americans and might ultimately lead to the fall of the American Economic Imperialism.

Obama might need to correct these steps. Economy will recover; it’s just the matter of time.


Rachel said...

I found your interpretation of the cause of America's recession very interesting. The media coverage in America has, if anything, portrayed the Obama administration as putting the blame on poorly regulated national banks and irresponsible mortgage lenders, not on China. I think I have read of perhaps one negative comment, on the part of Timothy Geithner, regarding China's role - and I don't think anyone here thinks Obama himself blames China.

Paramendra Bhagat said...

Great post.

eljefe949 said...

As far as taking Hillary Clinton as Secretary of State it has nothing to do with adding experience. It everything to do with neutralizing his biggest political opponent. He has been able to shut down all criticism from her as a result and effectively take her out of the game.

"This might kill the performance culture of the Americans and might ultimately lead to the fall of the American Economic Imperialism."

I agree and in many ways it already has...

Anonymous said...

I think the article is took it easy on President Obama. Let us remember President Obama is a big fan of President Roosevelt. President Roosevelt was an opportunist and took full advantage of the depression to implement his social agenda. The programs President Roosevelt created are now a huge problem for America. President Obama's is nothing more than a social engineer. I, like Mr. Limbaugh, hope his domestic agenda fails. He was the wrong choice for President. He would be perfect for Europe.

TooManyTaxis said...

"Obama seems to have hurried, and did too much to save the economy. His bail-out philosophy has not worked" Entirely agree,our Prime Minister Gordon Brown credits himself for giving the world this idea and constantly reminds us all how he will be the saviour of the world economy because of his fiscal policies and quantitive easing.

Sudeep said...

Good post. However things are not easy in today's economy. They are so interlinked and balanced by each other that you can't simply let one major bank or insurance giant fail.

We are having one of the most capitalistic world we ever had. Our theories of best course of action has been outdated. May be finally world is realizing that super capitalism will lead to inefficiency via giant organizations. So somewhere and sometime there should be some government interventions.

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