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| T N Ninan: Change means pain | |
| WEEKEND RUMINATIONS- T N Ninan | | T N Ninan / New Delhi November 22, 2008, 1:05 IST | |
Is there unrealistic enthusiasm, and hope, generated by Barack Obama’s election as the next US president? Many people seem to think that he is “The One” (to quote Oprah Winfrey), that he will set right all the things that have gone wrong in George W Bush’s America. Before throwing some cold water on the expectations, let it be conceded that it is just as well that Mr Obama beat Mr McCain—he focused on the right issues, ran a better campaign, and has shown both competence and empathy for the ordinary citizen. He cuts a clean figure, dresses well and has two attractive kids (all reminiscent of John Kennedy, who was shot dead 45 years ago, today). So he might go down in history for something more than being the first African-American president. Still, it is as well to ponder over how much one man can change a country.
The US today is dysfunctional in important ways. Its economy has grown in this decade by an annual average rate of about 3 per cent, which is exceptional for an economy of its size, but this has been achieved by piling up national and personal debt in a way that is not sustainable (think sub-prime). Annual growth without the fuel of debt accumulation would have been no more than 1.3 per cent, according to one estimate. Also, an extraordinary 40 per cent of all US corporate profits had been coming from the financial sector in recent years, but that sector has imploded. Wall Street’s decline will hit Main Street spending.
The average American accounts for twice as much greenhouse gas emission as the average Japanese, and one-and-a-half times as much as the average European. If Kyoto-style emission-reduction commitments that have been met by Germany (for example) are accepted by Mr Obama, they will mean a radical re-writing of American consumption patterns, including oil. Then, the average American spends twice as much on health care as the average European, so that an astonishing sixth of US GDP is spent on health care, without Americans living longer than Europeans. Changing this massive misallocation of resources will be difficult, not least because of lobby power. On top of all of which, the US physical infrastructure now compares poorly with most industrialised economies, and will call for large investments. Take it all together and this is a system in urgent need of fixing.
Correctives will mean households having to save more and spend less, and the economy as a whole having to borrow less from overseas; this may not even be a matter of choice, because China will not continue to be a willing buyer of paper issued by the US government, as its priorities have shifted to boosting local consumption and saving less.
To his credit, Mr Obama has addressed all the big ticket issues—health care reform, cutting unproductive government expenditure, addressing climate change, and reducing dependence on oil (apart from correcting military over-reach). But the total package will mean asking Americans to change their lifestyles and perhaps their expectations of the near-term future as the country undergoes major transformation. The end result (if it all works) will be a healthier system, but the change will mean pain. The danger is that support for the new president evaporates as he attempts the change that he has promised; remember that what went down as Jimmy Carter’s “malaise” speech of 1979, which may have cost him a second term, was about reducing dependence on imported oil and developing alternative sources of energy. Mr Obama is better with words than Mr Carter was, but Americans don’t like to be told some things! So the test will come when Mr Obama tries to deliver the “change we need”.
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