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The audacity of hype

As Barack Obama comes up to his 100th day in office, the limitations of his power to determine the course of events are cruelly exposed, nowhere more so than in relation to the economy.

Yesterday, the once mighty car corporation General Motors put forward a plan to hand over its shares to the government and to the trade unions because it is broke. Thousands of jobs are being shed at plants all over the world but it is not enough to save GM from collapse. There’s a similar story over at Chrysler, where demand for its cars has collapsed.

Unemployment in the US is soaring by over 625,000 a month and the Obama administration is unable to stop the jobs haemorrhage. His “stimulus package” is bogged down at local level, thwarted by Republicans if it is not mired in bureaucracy.

Repossessions of people’s homes rose by 9% in the first quarter of 2009 to over 341,000, despite Obama’s promise to help those unable to pay mortgages. One in every 27 Nevada housing units and one in every 54 California housing units received a foreclosure notice in the quarter. Cook County, Illinois, the second most populous county in the US which includes the city of Chicago, has had to suspend hearings because of a backlog of tens of thousands of cases.

Meanwhile, plans for the greatest redistribution of wealth from the public to the private sector – from taxpayers to the banks – remain the president’s preferred way of trying to end the credit crunch. Relying on discredited advisers from the Bush administration like Timothy Geithner, his treasury secretary, the White House is into yet another bank bail-out after the failure of the previous one.

The Public-Private Investment Programme (P-PIP) is aimed at buying up toxic debts (now renamed legacy assets!) by providing purchasers with a subsidy at an amazing 85 cents per dollar. It allows the banks with the debts to participate in the scheme and to retain any future profits while the state guarantees them against losses on transactions. No wonder critics have dubbed it “cash for trash”. Popular anger continues to mount against the US banks, with the focus now on the Bank of America’s CEO Ken Lewis. A service workers’ union has mounted a campaign to remove Lewis, whose bank has taken $200 billion in taxpayer funds, in a series of actions planned for today.

Supporters of Obama seemed surprised by what has happened and warn that the president risks losing the goodwill that swept him into office. Robert Kuttner, co-editor of The American Prospect, writes, more in sorrow than anger:

The White House seems to view popular backlash against financial abuses as a dangerous force to be bottled up, rather than one to be mobilized to offset the concentrated power of elites.

Fighting the “power of elites” has, however, never been on Obama’s agenda so he can hardly be accused of betrayal. The Democratic Party historically is a capitalist party, ruling over America in a division of labour with its Republican opponents. It is, therefore, not capable of much more than tinkering around the edges, as Obama’s first 100 days have demonstrated.

Obama rode a tiger of public support to get to Washington as the country’s first African-American president on the promise of change. Yet his administration is being overwhelmed by the impact of the deepest global economic and financial crisis in history and its commitment to restoring capitalism to some kind of health.

The political implications of this are considerable, not to say revolutionary. As the audacity of hope turns into the audacity of hype, the American people will surely have no choice but to take action themselves and create a politics that replaces, rather than offsets, the elites that have wrecked the economy.

Paul Feldman
AWTW communications editor
28 April 2009

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