The Power of Hope
Gregson, Jonathan, Global Finance
President Obama's determination to do "whatever it takes" to rebuild the economy appears to be paying off. But it is his actions across the whole range of policy initiatives that will have the greatest impact on global corporations.
When Barack Obama entered the White House last January, it looked like the world economy was falling offa cliff. SLx months on, and stock markets around the world have made good practically aLl of the losses racked up in the first quarter. Emerging markets such as China and India have surged even further into positive territory. Near universal fear has given way to cautious optimism.
Recent weeks have seen a rash of signals indicating that the United States might be the first of the developed economies to enter recovery. Banks are lending to each other again, though mortgage and consumer credit remains tight. Both inter-bank and credit spreads have returned to levels last seen before Lehman 's collapse. Goldman Sachs, Morgan Stanley and other major banks have pushed through multi-billion dollar recapitalization issues and started to pay back loam from the government. Even battered hedge funds have seen investment inflows outpacing redemptions. "The improvement in market sentiment since last October," says Stuart Green, global economist at HSBC, "should not be underestimated. If there are doubts about the s ustai liability of the recovery, we're still talking about a recovery."
How much of this new confidence is due to the "Obama Factor"? The first US president of African-American parentage was voted into office on the promise of change, and so far his administration seems to be delivering, whether it be his $800 billion fiscal stimulus package, his sweeping healthcare reform plans or more recently his proposals to overhaul and strengthen the US financial regulatory system. Of course, these might be watered down as they go through Congress, but with a popular mandate and Democrat majorities in both houses, he is likely to win through.
Green points Co Obama's fresh mandate and continuing high approval ratings as "key to pushing through fiscal policies on such a scale and so quickly." And given the tearful marker conditions prevailing when he took office, speed was definitely of the essence. "Right across the policy spectrum," observes Green, "every area was pushed to exceptional levels." The scale of the stimulus, both monetar)· and fiscal, "has been significantly ahead of what was anticipated during the presidential campaign," he notes.
Business Reaps Benefits
"There's definitely an Obama factor, particularly in sending a message of confidence to the world," says Paola Subacchi, research director for international economics at the London-based thinktank Chatham House. And that bas been achieved not only by the boldness of decision-making and the sheer scale of his pro-recovery and healthcare programs, but by the more cooperative tone adopted when addressing other nations.
There has been a shift from the Bush administration's application of "hard power" toward a softer approach built around regaining the moral high ground, encouraging dialogue and using persuasion instead efforce. Obama's commitments to withdraw US combat troops from Iraq and to close the detention camp at Guantánamo Bay were more than election pledges; they sent out a message to those in the Middle East, in Europe and in Latin America who questioned America's moral leadership and resented its unilateralism.
Combined with the Obama administration's commitment to move the Israeli-Palestinian peace process forward, this time with die involvement of moderate Arab governments, Obama's efforts are diluting - if not entirely removing - the root causes of jihadist recruitment and broader hostility to America within the region. Obama has likewise used a series of finely balanced speeches to mend fences with sometimes unwilling partners like France and Germany and to defuse latent anti-Americanism in Europe. …