On the occasion of US President Barack Obama?s 100th day in office, the White House organised a press conference in which the steward of a wobbling economy wooed Americans that recovery and prosperity will come. One of the tricky questions that seemed to put Obama off guard at the event was about what had humbled him the most in his first 100 days. His reply was a giveaway of behind-the-scenes jockeying as the US economy keeps shrinking quarter by quarter.
Obama responded that although he held the most powerful position in the country, ?there are a lot of different power centres, and so I can?t just press a button and suddenly have the bankers do exactly what I want, or turn on a switch and suddenly Congress falls in line.? His assertion that the American legislature is a power centre which cannot be railroaded into falling in line with the executive was not novel. The American system of government has since inception been designed on the idea of ?separation of powers?, in which Congress, the judiciary, and the presidency check and balance out each other to prevent excess concentration of authority in a single institution.
Many presidents before Obama have felt the heat from uncooperative Congresses. But Obama has the satisfaction of a solid Democratic Party majority in both houses of the US Congress. While there may be dissenting voices within his own party, the legislature is overall in no shape to frustrate or block Obama?s agenda for ?change?.
But what has indeed bogged down Obama as he attempts a grand rescue of the US economy is the first category he mentioned, ie. bankers. Although founding fathers of the US constitution never foresaw a small class of financiers morphing into a thorn in the flesh for the presidency, Obama is admitting that this is the case today.
In the mid-19th century, the financial industry?s share in US GDP was barely 1.5%. In 1947, it was only 2.5% of GDP. It stabilised around 4% until the late 1970s. The capital needs for the information technology boom from the 1980s up to 2001 pushed the share of finance in US GDP upwards. But the real takeoff happened between 2002 and 2006, when the real estate derivatives trade shot up to astronomical heights. At its peak before the housing bubble collapsed, the financial sector accounted for 8.3% of US GDP.
Even so, does an 8.3% share of aggregate income merit bankers the status of an alternative ?power centre? to the president? Simon Johnson, the former chief economist of the IMF, wrote recently in The Atlantic that the US financial industry took advantage of the politics of de-regulation since Ronald Reagan?s presidency to become an oligarchy with a ?veto over public policy.? Both the top names in Obama?s economic team?Timothy Geithner and Lawrence Summers?symbolically and practically represent this oligarchy?s interests.
That an internal power struggle is ongoing in the Obama administration was hinted at when the White House released financial reports in early April disclosing that Summers had been paid millions of dollars by hedge funds in 2008. Obama?s comments on his 100th day that the bankers had to be ?listened to? and ?coaxed? rather than ordered by the state confirm that he has tried to assert his power over them in the context of nationalisation but failed.
The unhealthy capture of the state by a cabal of bankers is an albatross around Obama?s neck as he tries to revive the US economy. His best option towards economic recovery lies in easing Geithner and Summers out of their current hot seats and redirecting the American state to save the ?real economy?, which still accounts for the bulk of US GDP. But for that to happen, Obama needs mass mobilisation by the American people and an alliance with non-financial sector capitalists who are paying the price of a catastrophe they did not hatch.
The author is a researcher on international affairs at the Maxwell School of Citizenship & Public Affairs in Syracuse, New York