Obama’s victory: what does it mean really?

S P SETH

Barack Obama’s re-election as the US President reinforces the historic nature of his election first time around in 2008. He is the first Afro-Asian to be elected and re-elected the country’s President. Despite history being made in America, one cannot say that it marks the country’s progression into a post-racial era. This is because many Americans have never regarded him as a legitimate President by questioning his true American identity (whether or not he was born in the United States) and his patriotism  (being a closet Muslim). As a result, they have cast his policies, whether domestic or foreign, as designed to harm the United States.

Take, for instance, his domestic policy. Obama’s advocacy of a fairer tax system where rich pay more to help the country’s economy has been characterized by his opponents as an attempt to destroy the American dream and usher in a socialist system in the country. In other words, he is not a true American. In the foreign policy arena, as a closet Muslim, he is not hard enough on Iran and is not supportive enough of Israel on the Palestinian question. Which means that he will continue to struggle with the legitimacy issue, as much in his second term as he did in the first.

Identity issue apart, his situation vis-à-vis the US Congress remains unresolved. Which is to say that the Senate retains its Democratic majority but not enough to impede the Republican filibustering of important legislation by the Obama administration. And in the House of Representatives, the Republican Party retains its comfortable majority. In other words, the political gridlock, imposed on the country by the Republicans, will continue as before, unless they reach out to Obama’s overture of a bipartisan solution to the country’s problems made in his victory speech. If his first term experience is any guide, the Republicans are not likely to respond positively to this to legitimize Barack Obama and his Democratic administration.

This will soon be tested on the question of resolving the “fiscal cliff” the US must traverse requiring mandatory spending cuts and tax increases on the rich, unless the Congress works out a compromise. And if this measure goes ahead on January 1, as it will if the Democrats and Republicans cannot work out a compromise before that, it is estimated to cut growth by 4 per cent pushing the US economy into recession, costing another 2 million jobs. This will create a very messy situation, having serious ripple effects on the global economy. Besides it will set the tone for political infighting for the next four years of Obama presidency.

But in foreign policy arena, President Obama has relatively more freedom, especially in his second term. And this might, hopefully, allow him to reach out once again to the Muslim world, as he did in 2009 during his then famous Cairo speech. Which enraged Israel. And with this began a certain testiness in US-Israeli relations, particularly between President Obama and Prime Minister Benjamin Netanyahu that has persisted and indeed deepened with Netanyahu featuring in Mitt Romney’s election advertising.

Now that Obama will have more leeway, one might hope for some forward movement on the Palestinian issue, regarded by him, early in his presidency, as an important area of bridging differences with the Islamic world. Israel, and its US lobby, has succeeded in crowding out the Palestinian issue to put the spotlight on stopping Iran from acquiring a nuclear capability.  Netanyahu indeed wanted the Obama administration, and the west in general, to commit to military action were Iran to cross some redlines in its nuclear programme. Which, sensibly, the Obama administration refused to do, though further tightening economic sanctions against Iran. And this is starting to bite Iran. At the same time, Obama has said that the US wouldn’t allow Iran to have nuclear weapons.

Therefore, Israel is assured that, short of immediately bombing Iran into submission on the nuclear question, the US would stop it from reaching the nuclear status. Even that was not enough for Netanyahu, and he sought to pressure Obama into a specific commitment to attack Iran to tap into Obama’s electoral vulnerability.  Despite the Netanyahu factor, Obama is likely to maintain US’ strong commitment to Israel’s security because it is an issue that cuts across the party lines. But the personal chemistry between Obama and Netanyahu is unlikely to make them into close partners.

Though it is difficult to envisage any significant change in the US policy in the Middle East, with Washington continuing to follow the contradictory policies of supporting monarchies in Saudi Arabia and the Gulf kingdoms and being cautious about changes elsewhere in the wake of the Arab Spring, Obama should now prevail on Israel to implement the policy of a separate Palestinian state in the West Bank and Gaza with Jerusalem as its capital.

Another useful initiative would be to promote a nuclear free zone in the Middle East to also include Israel that has the largest nuclear arsenal. That will create a pathway for Iran to move in that direction. Any regional security architecture shouldn’t simply be premised on presumed threats to Israel’s security but also threats to the region from Israel. There is need for a comprehensive settlement in the Middle East, including Israel. Otherwise, the region will continue to lurch from one crisis to another. The re-elected President Obama has an opportunity to take some bold initiatives in this direction.

As for Pakistan, Obama is not likely to relent on drone strikes, as well as maintaining pressure on Pakistan to do more against the terrorists. In some ways, Obama has come to personify, for most people in Pakistan, their hatred for the United States, intensified with the killing of Osama bin Laden and compounded with drone strikes. The impending US withdrawal from Afghanistan is likely to further test this relationship. There is a strong belief in the United States that Pakistan’s military, especially its intelligence agency, ISI, has never been a serious partner in the fight against al Qaeda and terrorism. They are said to continue to harbor Taliban leadership with a view to foster a friendly Taliban regime in Afghanistan after American withdrawal.

Another area demanding Obama’s attention will be China’s increasing assertion of its regional leadership, bringing it into conflict with some neighboring countries that are also US allies. Obama has already reset the button on his country’s regional strategy in favour of a “pivot” to Asia-Pacific region. China is deeply unhappy about it and the region is likely to see some difficult times ahead.

All in all, even though Obama will have fewer constraints in refashioning some of the United States key foreign policies, he might not have much time and energy, in the country’s highly polarized political landscape, to expend his political capital in this area. In other words, expect more of the same nationally and internationally. 

Muddling in Europe

S P SETH

When Angela Merkel, German Chancellor, recently visited Athens, it is as well that she didn’t see the Greek protestors carrying posters depicting her as Hitler with his trademark half moustache. She was obviously shielded from any exposure to what has now become a regular feature in Greece, with its citizens protesting against more and more austerity measures imposed by the European Union. Otherwise, they won’t get the bail out money and the country will go broke, with all the nasty consequences.

Greece and, for that matter, Spain and other euro zone countries that have mounds of debt, are furious with Germany for insisting on a severe austerity regime to receive European credits. Because Germany has to contribute much more for the bailouts being Europe’s strongest economy, it insists that the debtor countries commit themselves to put their financial house in order. Which translates into austerity for the recipient countries, making Germany highly unpopular in Greece, Spain, Portugal, Ireland and much of Europe. A case is made that an undue emphasis on severe austerity will further depress these economies, and that won’t help them generate enough revenues to pay back their debts. Hence, too much austerity will be counter-productive.

The problem, though, is that Germany has to foot the major part of any further debt relief and it is not convinced that stimulation will produce the necessary results. In any case, it will be a long-term solution, if it works, and German citizens are not ready to carry the can for an indefinite period.  Besides, even though Germany has a sound economy, even the soundest economy can invite disaster on itself by becoming the ultimate banker of half-a-dozen or so sick economies in the euro zone.  Germany is also conditioned by its experience of run away inflation that created conditions for the rise of Hitler. Which explains Germany’s caution against throwing good money after bad.

Having said that, it is certainly as much in Germany’s interest as the rest of Europe that the eurozone should survive because its unraveling will have severe consequences, both politically and economically. It is important to remember that the progression of Europe into a European Union not only managed to keep peace in Europe but also led to an era of great economic prosperity.  And coming after the great disaster of WW11, it is no mean achievement.

Were eurozone to unravel, the European project is unlikely to survive the consequent economic turmoil of competitive devaluations and much more.  It is difficult to imagine how the existing debts and credits denominated in euro will be sorted out or settled. Greece’s exit alone, if that were to happen, will have a cascading effect on other debt-ridden countries, with Spain already under terrible strain. Italy too is wobbly, and if it were to need rescuing, Europe alone, even with Germany’s commitment, will not be able to cope. Spain and Italy are the fourth and third largest European economies respectively. The consequences of their failure for the global economy, mired as it is in the throes of the 2008-9 financial crisis, will not be pretty.

Until the financial crisis hit Europe in the last few years, every country in the project Europe gained from it. Germany was a major winner. Its membership of the European Union and NATO made it into a normal country overcoming its Hitlerist legacy. As a comparison, Japan still has to confront criticism of its wartime atrocities from neighbors. In economic terms, with its strong economy and competitiveness, Germany gained considerably from a larger European market for its goods. At the same time, as with other European countries, it bought its security cheap within Europe from NATO’s umbrella, with the United States footing much of the defense bill-- though for its own great power ambitions and security considerations.

For the rest of Europe, project Europe was important in containing Germany’s European ambitions and harnessing them to continent’s common good. And for Europe’s relatively poorer members the agricultural subsidies they received, with Germany paying a major share, significantly improved their living conditions. It is, therefore, apparent that project Europe has been a win-win situation for all, until now. And if it crumbles, Europe might take a long time to put itself together, if at all.

 However much the European countries want to keep Europe together, there is undoubtedly a lurking fear that they might not succeed. And greater the articulation of that determination to keep the eurozone intact, the more shrill the language becomes. Take this open letter, published in the New York Review of Books, from Alain Minc, President of the French consultancy firm A M Conseil.  In this he takes issue with “the financiers of America” about  “prophesies” regarding “the imminent death of the euro”. He writes forcefully that, “ …there is not one European political leader… who would be willing to take the blame in the eyes of posterity for signing the death warrant of the euro. “

And this is because, “The memory of the wars that ravaged European society is still too strong for anyone to be willing to undo the process that led to European unity…” In other words, despite all the emphasis on austerity, he seems to suggest, even Angela Merkel and German politicians might not let euro collapse, whatever the economic costs. The passion of such statement(s) indeed seeks to still the doubts that keep cropping up.

On the other hand, another high profile business magnate, George Soros, a Hungarian-American who is chairman of the Soros Fund Management, writes in a long article that if Germany were unwilling to underwrite euro and stimulate European economies, it might be best if it were to quit the eurozone. He believes that, “After the initial disruptions the euro area would swing from depression to growth. “ His hope is that faced with such a prospect, Germany would prefer to stay on.

Because:“…Germany would fare much better if it chooses to behave as a benevolent hegemon [like the United States did with its Marshall Plan to rebuild Europe after WW11] and Europe would be spared the upheaval the German withdrawal from the euro would cause.” Imagine eurozone without the strongest European economy! Soros can’t be serious. In whatever way Europe’s economic travails are resolved, or not resolved, the uncertainty is proving disastrous for Europe, and doing much harm to the world economy still mired in the aftermaths of global financial crisis.

 Note: This article was first published in the Daily Times.