Barack Obama could worsen crisis: likened to Smoot Hawley by Rupert Murdoch

Barack Obama 'could worsen crisis': Rupert Murdoch

Glenda Korporaal
The Australian
November 01, 2008

NEWS Corporation chairman Rupert Murdoch has warned that Barack Obama could worsen the world financial crisis if he is elected US president next week and implements protectionist policies.

In an interview with The Weekend Australian before delivering the first of six Boyer lectures on ABC radio tomorrow afternoon, Mr Murdoch said the Democrats' policies would result in "a real setback for globalisation" if implemented.

Mr Murdoch said he did not know whether Senator Obama would implement all of the protectionist measures espoused by the party.

"Presidents don't often behave exactly as the campaign might have suggested because they become prisoners of all sort of things - mainly circumstances and events," Mr Murdoch said.

He warned that any rise in protectionism in the US, including introducing trade measures against China as espoused by some Democratic members in Congress, would risk retaliation and could threaten the world trading and financial systems.

"For the past three or four years, some Democrats have been threatening to do things like put on extra tariffs (against Chinese imports) if they don't change their currency,' Mr Murdoch said. "If it happened, it could set off retaliatory action which would certainly damage the world economy seriously."

Mr Murdoch said Kevin Rudd had been "very sure-footed" in his handling of the financial crisis and defended the Prime Minister against criticism that he acted too quickly in his blanket guarantee of the deposits of the Australian banking system.

But the chairman of News Corporation, which owns The Weekend Australian, warned that politicians should be careful not to make the situation worse by "alarming people more than they should be alarmed, regardless of party".

"You've got to recognise when he (Rudd) did it, he did it the day after the biggest ever fall in the stock market and the US Congress's first refusal of the $700million bailout," Mr Murdoch said. "I think, relatively, over this whole financial period, he has acted very sure-footedly."

He said politicians should be careful that their comments did not further exacerbate the delicate financial situation.

Asked if the comments were meant to refer to Malcolm Turnbull, he said: "I don't think Mr Turnbull has done that."

With the US election five days away, Mr Murdoch criticised Senator Obama's tax policies as "crazy", particularly his plan to hand out tax rebates to most Americans and to increase taxes for people earning more than $250,000. He said Senator Obama's promises to give tax rebates to 95per cent of Americans was "rubbish".

"Forty per cent (of the US population) don't pay taxes, so how can he give them a tax cut?" he said. "But you can give them a welfare cheque which he has promised - a grant of $500 - which will disappear very fast. It's not going to turn the economy around at all."

Mr Murdoch said no one knew what would happen under an Obama administration "but his declared policy would see a real setback of globalisation".

Mr Murdoch said politicians should take heed of the lessons of the Smoot-Hawley Tariff Act in the US in 1930, which raised tariffs on American goods to record levels and provoked protectionist retaliation by US trading partners, slashing world trade levels and sending the world economy into depression.

Mr Murdoch said Senator Obama would make the situation worse if he implemented the policies he had promised the American union movement, which represented only 12 per cent of the US workforce, most of them government workers.

"We have the historical precedent of Smoot-Hawley," he said.

"I can't imagine he would do anything as crazy as that. But anything in that direction could add to all sorts of tensions in the world financial system and the world trading system and eventually all the way down to employment. I am not saying all these things are going to happen, but we are living in a dangerous period."

He said the whole world should "fight like hell" for freer trade and the success of the Doha Round of trade talks.

Mr Murdoch rejected suggestions that Tuesday's US election could act as a circuit breaker for the current crisis of confidence in world financial markets.

"To some extent it is beyond the power of politicians," he said. "You are going to find that the politicians are very limited in what they can do: they can make it worse but they can't stop it."

Mr Murdoch said there was a slight easing of the liquidity crisis, as market interest rates had edged down in recent weeks. But he said the financial crisis would inevitably affect economies for some time. Mr Murdoch said a push for freer trade around the world, including the success of the Doha Round, could help the world economies come out of the recession faster.

"But if it (world trade) goes the way that a lot of politicians are talking in a lot of countries, you are really going to slow down trade and business in every way," he added.

Mr Murdoch, who arrived in Australia this week, will record the first Boyer lecture tomorrow in front of a live audience at the Sydney Opera House.

The series of lectures is entitled A Golden Age of Freedom and includes Mr Murdoch's views on the rise of the new global middle class, his concerns about the raising of education levels in Australia and the importance of being ahead of the curve in using new technologies.

The third lecture is a detailed exposition of Mr Murdoch's views on the future of newspapers. Mr Murdoch has been scathing of journalists in the US, whom he argues have been all too eager to predict the demise of their own industry.

He told The Weekend Australian that newspapers would survive, although they might have to live with lower profit margins because of competition from the internet. He predicted that newspapers should see the internet as an opportunity to reach more readers in a world where people were increasingly hungry for more information.

The 2008 Boyer Lectures will be broadcast during Big Ideas on ABC Radio National at 5pm each Sunday between 2 November 2 and December 7 (and repeated the following Saturday at 7pm.)

The lectures will be available as audio on demand, podcast and mp3 for download from www.abc.net.au/rn/boyerlectures/

The first lecture will be published in full in Monday's edition of The Australian and will also be broadcast on ABC1 on Sunday at 10.15pm.