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15 April 2024

A lawyer takes on an economist's job

Obama has called for denying tax benefits to offshoring firms to save local jobs. (GETTY IMAGES)

By Shashank Shekhar

Forty-seven years old, the first black President of the United States does not have a degree in economics. Neither did he have the time for a crash course since he won the US presidential election and realised that his primary challenge is to put his homeland's (and effectively the world's) economy in order.

Nevertheless, from today Obama has to appear for a series of economic tests.

Obama, a lawyer by training, is arguably the world's most admired politician. But his primary job will involve bringing resilience into a system that has collapsed and keeps on deteriorating. It's about walking out of an "aggressive loan marketing" and "virtual trade" that has built over a period of 30 years and simultaneously stimulate trade.

The omens of the arrival of Obama's train in Washington have been good but not on the economic front. The world has high expectations from this man.


Obama is a rational man. He has won the presidency on the powers of rationality. So it did not come as a surprise when he set aside his initial apprehensions and decided to support the massive $700 billion (Dh2,571bn) bailout plan of the George W Bush administration. Over Bush's stimulus, he now plans a trillion-dollar stimulus apparently on the advice of his new coterie.
But will the bailout plan have the impact it is intended to have?

Obama has said he will ensure the second instalment of bailout trickles down to the people. That includes students getting loans to study and car buyers getting loans to drive to work. Nobody would understand the importance of this level of economics better than Obama's "best friend" and wife Michelle, who paid the final instalments of her student loan only a few years ago.

The chief executive of a Houston-based petrochemicals company recently told Emirates Business that the stimulus package has so far had little impact as the "banks are taking money from the Central Bank and lending it to each other".

That's probably where the greatest fear lies. Obama was a critic of bailouts being offered to Detroit car manufacturers. He supports them now. He promised change in his administration. He has bowed to a variety of political lobbies and appointed old faces.

Will he bow once again before the Wall Street lobby? The average American may be left with nothing but a sense of humour.

"We are the leaders of the crisis. We are the best at whatever we do," Miller Mathis, Senior Managing Director of Miller Mathis, a New York-based company that provides advisory services to metal majors, said in Dubai recently.

The Troubled Assets and Relief Programme (Tarp) plans to pump $1.5trn into the US economy within months. The American Reinvestment and Relief Programme (Arrp) plans to invest in sectors such as green energy. But then will the Arrp lose its steam due to low oil prices?


There was a total of 533,000 job losses in the US when its official machinery last counted. The figure may well rise by the time Obama assumes office later today. The National Bureau of Economic Research pegged unemployment at 6.7 per cent and said America has been in recession for a year.

Reports point out that sectors such as health and risk management will show resilience and continue to recruit people. But then America is not about health and risk management alone.

Obama has now supported the bailout of automobile majors to prevent job losses. That may have a cascading effect and save jobs in the upstream aluminium and plastics industries. That's another ray of hope.

Obama has proposed government programmes for bridges, roads, broadband internet and schools as well as plans for greater energy efficiency and health spending. These proposals were part of speeches that evoke socialism. And socialists are not the best people at running economies.

Obama has called for denying tax benefits to offshoring companies to save local jobs. This is how the chief executive of an Indian company described it: "You can remove horns from the head of a person as he does not have it. Ask Obama to list the benefits available to companies that offshore. What will he remove?"


In the last 12 years there have been 51,000 new regulations in the US economy. And apparently they have not had the desired impact. John Wright, former CEO of Bank of Oman, recently said the stimulus packages themselves sound of deregulation and may end up inflating the US economy once the crisis is over. In layman's terms, there are two regulations that economists and the old-and-tested banking system are calling for:

- Don't give loans to people who don't deserve them.

- Do not coerce people into spending more than they can afford.

Can Obama ensure this?

Obama's energy secretary, Nobel Laureate and Director of Lawrence Berkley National Laboratory, Steve Chu has been his most appreciated selection. It certainly made diehard Bush critics like Thomas Friedman happy. But then it remains to be seen whether Obama can bring visible changes in a span of one or two terms.

His plan to cut dependence on imported oil by 35 per cent is a 20-year soap opera. Chu certainly has the potential to direct the focus of world's research activities. If the internet as a wave emerged from the US and spread to the nooks and corners of the world, so can clean energy.

Finally Russian President Vladimir Putin did not mince words when he blamed the US for the world's economic turmoil. Little did one realise that it was also the world's second most powerful person accepting that his country's oil-and-gas-rich economy depends on its past rival.

So it is the US who has to lead us out of the crisis. Will Obama be the helmsman?