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Caribbean lessons from US election

Mariano Browne

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After weeks of warning that the United States election would be too close to call, the result was something of an anticlimax, albeit that this was a relief to most people around the world who feared a Mitt Romney presidency.
President Barack Obama’s decisive victory puts him into the select ranks of two term presidents. He has already established that he will be remembered for posterity as a transformative figure in dealing with big issues.
The Republicans from the onset of his first electoral success had set out to make Obama a one term President. That he avoided that fate, especially in the face of economic conditions that would ordinarily dictate defeat, is due to several factors not the least of which was a successful campaign mechanism, and economic policies that have worked, even if slowly. Moving forward will not be easy.
But what does a second term Obama mean for the Caribbean and indeed the rest of the world?
His first task is to deal with the economy which has proven to be a more difficult fix than anticipated. The 2008 recession was caused largely by the free market policies in the United States and loose regulation of the financial sector in particular.
Fixing these problems is still far from done, but the United States banking system has largely been recapitalized. More importantly, President Obama has done what the free market principles of the Republican Party would not do, and that is to address the difficulties in United States manufacturing by supporting the car manufacturers as a first step.
But the immediate task is to hammer out a long term approach to deficit reduction and to the management of the “fiscal cliff” (automatic expenditure cuts and tax rises if no budget deal is arranged). If he completes this successfully, he would prove himself a bipartisan leader and the economy would grow in the ensuing confidence.
President Obama has wasted no time in signalling that the fiscal gap must also be reduced by increasing taxes and that the burden must be shared. There are several policies that could help. Stimulating enterprise and job creation, investing in infrastructure, education and science; issuing visas for highly qualified immigrants, corporate tax and reducing complexity in business regulation. The sharp drop in equity prices after the election is a significant indicator about how the markets will react if a budget compromise is not reached.
The Bill Clinton administration faced a similar issue in 1993. The then Treasury Secretary, Robert Rubin, fashioned a plan which laid a solid foundation for growth and the creation of 22.5 million new jobs and n the process, generated a substantial surplus and laid the groundwork for a sturdy and growing United States economy.
A growing American economy is in everyone’s interest.
This has significant implications for us in the Caribbean as all governments are in growing deficit positions which are unsustainable and must be addressed with expenditure cuts and realignment as well as raising additional revenue. This has not been addressed holistically by any government, least of all (here in) Trinidad and Tobago.
So also must foreign policy be reshaped. A rising China along with the other Asian tigers, Brazil and India and their strength through the recession of the last four years suggest some readjustment.
In addition, Obama inherits an unstable Middle East and the prospect of a nuclear Iran. The proximity of Latin America and the changing United States demographics, so clearly demonstrated during the last election, suggest that Latin America will remain important.
But it is the Pacific region that will hold increasing significance, especially in view of the increasing outward orientation of China and the discovery of new oil and gas reserves in the China Sea. The struggle for the control of these resources has already begun.
Whilst the Caribbean will remain an important source of votes in international fora, our significance will continue to decrease. Further, given the shale gas revolution, the importance of Trinidad and Tobago is also diminished.
But the real lessons lie in how President Obama will deal with the social issues; pensions and social welfare issues especially health care for the elderly. This is particularly important in the context of the Caribbean.
Most of our independence leaders came from the London School of Economics.
As a result, they imbued their early administrations and theirs successors with a form of Fabian socialism and an expanding role of the state.
What is worse is that this orientation is now part of the popular view and our various publics expect the state to accept the role of “provider” of a wide array of public goods. In dealing with the realignment of public expenditures which is so necessary to dealing with the fiscal deficits, a balance must be struck and a new orientation devised.
In this regard, the critical message of the conservative wing of the Republicans, the Tea party – that taxpayers cannot expect $5 in government service for every $3 they pay in taxes – is unlikely to be proved wrong over the long term.