Saint or saviour: Obama's big agenda

Barack Obama takes office today — actually, tomorrow, our time. Two years ago close to this time Ben Bernanke took office. The two are joined at the hip.

Obama comes to office with reverence befitting a saint or a saviour. He is neither. But if superhuman acts are expected of him, that is because his agenda is superhuman.

First major task: the economy. The United States got the world into the mess it is in (though with willing fellow-travellers). Fixing the world mess requires the United States to fix its mess.

Enter Bernanke. He made his stellar academic reputation analysing what the United States authorities did wrong after the 1929 crash (which triggered the 1930s world depression) and what they could have done right.

Bernanke chairs the Federal Reserve Board, the United States’ central bank. He is one of the two or three most important authorities right now. His job is to do right what his predecessors did wrong after 1929, to avert depression, even if now he can’t avert recession.

But Bernanke was one of those who got the United States — and the rest of us — into this mess. He furnished the intellectual justification for the Federal Reserve Board not leaning against the bulging bubble in the late 1990s and against the house price and lending bubble in this decade.

He argued that central banks could not be sure whether there was a bubble and in any case couldn’t do much about it if there was one. The central bank’s role was to fix things afterward so there was no undue downturn in the real economy.

Ahem. Central banks are supposed to keep an eye on money supply. Bernanke’s predecessor, Alan Greenspan, talked of “irrational exuberance” as early as 1996, which suggests he worried a bubble was forming.

In fact, debt was rising fast and eventually would match the debt frenzy of the 1920s before the devastating 1929 crash. That might have been contained with tighter regulation and more active regulators. Greenspan fought tooth and nail against that. Bernanke backed him with theory. So a second bubble bulged, in house prices and mortgage lending. If you lose your firm or your job in this downturn, blame it in part on Greenspan and Bernanke.

Bernanke’s job now is to keep credit flowing. Obama’s impossible job, with the Congress, is to throw enough government money around to stop recession sliding into depression — but without wrecking the United States’ already fragile fiscal state, severely weakened by George Bush’s wayward stewardship.

And to do that, Obama has to keep China sweet because he will need to borrow mind-boggling quantities and China has been the big lender and now needs to shore up its own economy.

And because Obama will be borrowing heavily and the whole rich world will, too, trying to stave off depression, that may well make Bill English’s job harder. He, too, needs to borrow, heavily.

Second major task for Obama: rebuild United States’ friendships abroad.

This is not smiles and cocktails. The hubris of the Bush administration, with its talk of an axis of evil and “those who are not with us are for the terrorists” and its invasion to implant American-style democracy on Iraq ready-or-not damaged the United States’ standing.

This matters to us because in the Asian and Muslim worlds the United States is seen as the standard-bearer for, and epitomiser of, the “west” –and the “west” includes us.

Obama will need a fine balance of humility and confidence to rebuild trust and respect. As part of that, it falls to him to lift the United States out of its disabling self-interestedness in the Doha trade and round and climate change negotiations. He must excise the United States’ exceptionalism.

And he must do that in a changed world, in which power is shifting from the North Atlantic nations, particularly the United States, to Asia, particularly China. United States’ indebtedness to China underscores that point.

Again, he needs a fine balance. Kishore Mahbubani, dean of Singapore University’s school of public policy, argues that while the “shift of global power to the east” is “irresistible”, it does not have to lead to contest or conflict.

Asia wants the prosperity the “west” has, Mahbubani has written and has adopted and adapted “western” values as integral to that pursuit. Obama’s task is not to try to arrest the shift of power or to compete with rising Asia but to share power, Mahbubani argues. That way both Asia and the “west” win.

Formulating policies to do that will be formidably difficult, both in the crafting and in the selling, both at home and abroad.

That highlights Obama’s third major task: restore the United States’ belief in itself.

Once Americans lived their dream, the land of freedom and opportunity. Too many no longer do. Too many have not shared in the wealth boom of the past two decades and they are being joined by many more as the economy tanks.

Saint or saviour, Obama has his work cut out. We have much riding on him, even in this tiny corner.