Obama’s green deal will not save economy

The following comment by me appeared in the latest Fund Strategy (19 January).

The pilot who landed his damaged aeroplane on New York’s Hudson river without suffering any casualties performed a remarkable feat. It is unlikely that Barack Obama will prove so lucky or so skillful in his stewardship of America’s ailing economy.

Obama was elected on the back of an understandable yearning for change among the mass of Americans. Unfortunately he is unlikely to offer anything fundamentally different to what came before.

Anyone who followed Obama’s campaign closely would notice his conception of “change” became ever narrower as time progressed. By the end it meant little more than Obama rather than George W Bush sitting in the Oval Office.

Obama’s political appointees are largely cronies of former President Bill Clinton rather than Washington outsiders.

To an extent the critics have also been unfair to Bush. There is certainly a lot he can be justly criticised for but the image of him as a doctrinaire free marketeer is a caricature. It was under the Bush administration that many billions of dollars were spent in bailing out financial institutions and the car industry. But even before that America was far from a free market economy. In 2007, for example, state spending accounted for over 37% of GDP.

Obama is a slicker orator than Bush but he is likely to continue his predecessor’s pursuit of muddled pragmatism. At present both have proved intent on spending huge amounts of money, both through fiscal and monetary policy, to shore up the flagging economy. No doubt when inflationary pressures start to emerge, likely to be in a year or two, this policy will be reversed.

It is true that Obama is promoting a “Green New Deal” but this looks set to make things worse rather than better. It is unclear exactly what it will mean but it is likely to involve investment in low technology and low productivity jobs.

Obama looks likely to follow Bush in failing to develop new sectors of the economy or revitalising old ones. Both fail to realise that the fundamental problem is not the lack of credit but the dearth of exciting opportunities to invest in.

Genuine change in America and the world economy would be welcome but Obama looks unlikely to provide it.