Wednesday, 21 January 2009

A Policy Speech, But No Global Leadership

Most commentators are underwhelmed by Obama’s inaugural speech. However, an analysis of the text reveals the reason for the disappointment. Going against the expectations, this was a mostly policy speech, although you have to work a bit to uncover the content.

In my count (and categorisation) 43% of the speech was directly policy related. Of that, around half (21% of the entire text) was dealing with the US economy. Here is my translation of the contents of economic policy bit: The US economy is in crisis. The endowments are still the same, but effective government action is needed. The coming government measures should be judged by their quality and not by their size. His government’s investments will be in: infrastructure, science and technology, alternative energy, all three tiers of the educational system.

There was zero mention, or even a hint towards the global economy, and the fact that the US economy is part of it.

Yet, there were three different mentions of the global socio-economic system.

One. Global society -- the most circumvent way of putting it:
We are shaped by every language and culture, drawn from every end of this earth; and because we have tasted the bitter swill of civil war and segregation, and emerged from that dark chapter stronger and more united, we cannot help but believe that the old hatreds shall someday pass; that the lines of tribe shall soon dissolve; that as the world grows smaller, our common humanity shall reveal itself; and that America must play its role in ushering in a new era of peace.
A translation of the above would be something like this: The US is a culturally diverse place that managed to form an identity out of a series of shocks. The global society is also a culturally diverse thing that will see a common identity rise, and the US should be instrumental in that.

Two. Cooperation with others on two global problems:
[We] can meet those new threats that demand even greater effort - even greater cooperation and understanding between nations. [...] With old friends and former foes, we will work tirelessly to lessen the nuclear threat, and roll back the spectre of a warming planet.
Thus he supports a global-level policy on nuclear non-proliferation and climate change, as far as ‘cooperation and understanding among nations’ and ‘working with all others’ counts as such). In any case, there are existing global institutions for both, which the Bush government largely ignored, so this may only be a promise towards the US takings its share, rather than any new global leadership.

Three. There is no mention of global economic policy architecture, but there is an indirect, implied presence of some kind of global policy institution in this quote:

To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow; to nourish starved bodies and feed hungry minds. And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to suffering outside our borders; nor can we consume the world's resources without regard to effect. For the world has changed, and we must change with it.

Despite a relevant point (economic development aid in poor countries works better if it comes especially to healthcare and education, and in the form of assistance rather than aid money), the global policy promise is there only if you want to imagine it: effective delivery of economic development aid, as well as an enforced global constraint on resource extraction would imply some form of policy forming, implementing, monitoring, and rule enforcing global body.

Overall, this speech has not done much towards outlining a global economic policy architecture, which would be, and probably will be, necessary to contain the current global crisis. That’s a pity.


  1. Wow. Good piece.

    Interesting how all talking heads missed the point.

  2. Respectfully, it is you who is missing the point. The presidential inaugural speech has a special role in the American political discourse. It is not about setting policy objectives. Obama's failure is exactly in the high stats that are Tamas calculated.

  3. Did you hear anyone highlighting the policy content amidst all the euphoria? No? There is my point.

  4. Isn't it that him being there was a statement enough? That he could afford focusing on policy, even if so terribly wrapped up into nice words?

    Btw rhetoric. I am not sure if many non-native English speakers around the world actually understood the promises relevant to them.

    Don't you agree that the main message of this speech to us: he will stick to the American realm, seek global leadership only as much as it is needed for him at home.

    Either people who think that global economic policy will be inevitable are wrong, or the pain will get much worse before it gets better.

  5. So to what extent is the US "responsible" for nations that are dependent on its ecomony?

    Put another way, what kind of global economic policy do you think Obama should be offering?

    I'm not sure myself, just been pondering this question and curious what you think.

  6. I do not think that the problem here is that there are poor countries around the world that are dependent on the mighty US economy, and thus the latter is somehow responsible for the former. This was, perhaps, the case twenty years ago, but not now. The emerging markets are increasingly linked to each other (and to other non-US mature economies), and thus if there ever was such a 'responsibility', the case is weaker now.

    It is much more that the US economic management needs to realise that their country is increasingly dependent on the global economy. This is obviously true if you look at trade statistics based openness indicators. However, I would think that this measure will grossly underestimate the level of integration. This is particularly the case in the financial sector: although on the surface a Denver mortgage would have little to do with a Thai currency derivative instrument, if you scratch it, it turns out that the underlying fundamentals are all to with the global economy, and thus at the end create a link between those two.

    And this comes my call for global economic policy institutions. I think that this crisis comes as the result of a, mostly, uncontrolled build up of a global financial structure. The local macroeconomic elite pretends (in most places around the world) that the problem was the lack of local (national level) control. Maybe, to some extent. But it is more like a quarter inflated balloon that you try to squash into your palm. It will always come out somewhere, until you manage to cover it fully. You need a very large palm for that. That's our global regulation. However, it will turn out that you cannot do this without some form of global monetary policy, some form of global fiscal policy harmonisation. And thus comes some form of (oh my god, oh my god) global government functions....

    Obama's role. Contrary to popular belief, the largest economy of the world is not the US, but that of the EU. However, for some strange reason (the lack of integration is clearly not one of them) people do not add up figures. Anyway, it is clear that Europe will not stand up (although Sarkozy does try), and nobody else in the world would have enough political clout to push for effective global economic policy, bar Obama. And there is the argument.

    Do you buy it?

  7. For an argument re Europe's behaviour in this crisis, see this earlier post.

  8. tamas,

    are you saying that whatever obama or geithner does will not matter?

    that's a bit far fetched, no?

  9. As I pointed out at the beginning of the crisis's autumn round, any government that offers a full backing for its globally integrated financial sector, effectively takes on a global level insurance function. You could read the UK's current problems in this framework, as well as the issues that will inevitably come up with the Obama-Geithner plan. Thus what the latter offers will not be without an effect, but it is really a gamble on the length of the global crisis.

  10. Interesting - yes that all seems very logical. I couldn't quite believe you were implying that the US needed to take care of all these poor countries that can't help themselves, so this makes more sense!

    Have you written to Mr Obama yet?

    I would actually be quite happy about a global governing entity - nations are so inconvenient sometimes... and as a dual national, it's always a pain trying to get a straight answer about anything that extends beyond the reach of one country or the other. We just need global citizenship and virtual communities. Geographically-based nations are so 1998..!

  11. You know what's interesting? Some very remote parts of the world have some of the most global aspirations. In Papua, for instance, the local leaders' aspirations are in a global framework. It was maybe the biggest surprise for me. (Well, at least one of them.) There are of course a lot of local reasons for it, but in my 60+ research trips into emerging economies, I had never heard the term 'human', 'mankind' as often (or even ever, now that I think of it) as in the Papuan Highlands.

    And Obama is the big hero there. (He is 'Indonesian', he is black, and he is Christian.)

    But I wonder what the identity would be in a global society. Or at least, the out-most layer of the identity onion. What do you think? 'We are all African' stuff?

  12. I think what's so interesting about Obama is that so many people can relate to him in one way or another - and it's because he represents so many different things.
    Maybe it's not so much that there will be one single shared identity, but that things other than geography and nations will drive the connections we make and what defines our sense of identity, like the virtual community idea.

  13. This is an interesting point you raise. Whether the technology would permit an outer layer for our identity onion (pyramid, whichever) not actually be shared with everyone, but rather be made up of many 'thread nets' of people all around the world sharing their own version of global identity with each other, but not everyone. A kind of mutually exclusive set of global identities.


    I do not know a historical parallel for this. Do you?

  14. Well I don't know about historical parallels but now that I read your comment again, it suddenly sounds a lot like Wittgenstein's concept of family resemblances as relates to the meanings of words... as in, overlapping similarities but no specific "essence" that is common to all.
    But then, in my mind, apparently everything comes back to language and/or Wittgenstein..!

  15. Hmm... maybe I could write a thesis looking at connections between theories of meaning and theories of identity... throw in some ideas about online social networking.... that could be interesting... and would need to be a little more specific... (Still pondering the whole phd idea!)

  16. Jess,

    Re the first of your two recent comments: If you were to use the Wittgenstein approach in this case, that would, perhaps translate into every individual having 'somewhat' exclusive identity, and thus the 'global' bit would be merely a projection onto a wider screen.

    This sounds similar to the observation of Vilmos Csanyi, who says that the open societies that are dominating the global scene somehow ended up being constituted by the relationships among one-person groups. He argues that each individual has the kind of social relationship with other individuals, that resemble the inter-group relations in archaic, closed human societies, as opposed to intra-group type relations.

    Re your second comment: That would be rather interesting, indeed. Figuring out how social networking is giving rise to a global language, and, perhaps through that, a form of global identity.

    I have been toying with the idea of how the post-crisis financial knowledge creation (for the problem outlined, see this post) might see a solution through quasi academic / macro / capital market blogging. It seems that blogging is, or at least can be, a form of interactive communication (thus group-think) about particular questions. It is less closed than social networking, but way more interactive than the broadcast type opinion pieces that are out there. I think capital market research was already on the way towards this direction when the global downturn had hit it.

  17. Maybe there some 'global leadership' is coming up, after the months of silence: read this position press briefing for the G20.