Obamas Fortress America..What of the US Australian alliance?

Can Rudd stem the rise of fortress America

Piers Akerman
News.com.au
Saturday, November 08, 2008

Without wishing to be too harsh on Barack Obama’s self-satisfied supporters, there are valid reasons Australians must watch this pilgrim’s progress with concern.

In particular, it would be valuable for those who swooned in front of their flat-screen televisions and partisan blog sites to consider the economic situation Obama inherits, particularly the fall-out from the sub-prime crisis, and the make-up of the Democratic Party-controlled Senate and House of Representatives.

Add to those factors the term “Smoot-Hawley’’, and the equation becomes quite unattractive. Let me explain. No matter what the economically illiterate Kevin Rudd might say, the global financial crisis was not triggered by ``extreme capitalism’’.

Quite the opposite, in fact. It was set in play by the creeping socialist tendencies of Obama’s Democratic colleagues, who encouraged US mortgage funds to issue loans to individuals who clearly did not have the means to service their debts.

Some of these mortgages became known as NINJA loans - No Income, No Job, No Assets - which is a clear assessment of the recipients’ credit-worthiness. They were issued to people who could not afford them under the doctrine of fairness that Obama is committed to continue. The doctrine of fairness that precipitated the economic slide.

The US, with around 900,000 people pushed on to the jobless lists this year, is in serious straits. Obama’s election was, in part, a reaction to this situation, but the tide had been running against the Republicans for years. Which brings in the second part of the sum: Democratic Party control of both Houses of Congress.

For most of his second term, George W. Bush has borne the ire of foot-stamping throngs of outraged celebrities and their hangers-on over US policies, even though he did not have control of the legislature.

That was in the hands of those the self-same star-studded crowd had supported, and it was firmly cemented in their hands after the mid-term election two years ago, when the Democrats won the seats they needed to give them control of the House and Senate for the first time since 1994.

The Democrats captured so much power in the November, 2006 election that it was the first time in US history no Republican won a House, Senate or governorship that had previously been held by a Democrat. Not only did the Democrats sweep in, but those who did included representatives who are considered far more to the left than the colleagues they joined.

Many were from Rust Belt seats whose industries had shut down as manufacturing migrated to nations with cheaper labour forces, fewer or no trade unions, and less prohibitive environmental legislation.

Think China. These new numbers naturally meant the Democrats were elevated in status. Nancy Pelosi, again, from the Left of the mainstream Democratic Party, became both the first Californian and the first woman Speaker of the House. The left-wing members of the Democratic Party have more power than they can remember. What they want, and what the Rust Belt members and those from rural areas want, is more protectionism.

They want to see secret ballots for trade unions abolished, they want to see unions rebuilt, they want to see jobs return to the US and they want to see American agriculture given the protection it needs to compete against more efficient producers. Further, these people are ideologues like our own entrenched trade-union leaders, and they want their demands met, irrespective of the effect their agenda will have on the US economy.

The free-trade push that Australia has supported under John Howard and Kevin Rudd is effectively dead in the water. Under the Obama administration, there will be increasing pressure to return to Fortress America. There aren’t too many Democrats left who support opening up the US economy, and even the Republicans have lost their drive to stand up against protectionism.

The scene isn’t that dissimilar from that in 1930, when, to meet rising calls for protection from special-interest industrial groups, a piece of legislation known as Smoot-Hawley was passed to enshrine protectionism. It effectively killed economic co-operation among nations and set off a gross contraction in international trade.

Australia, of course, enjoys a very special relationship with the US, but that was enhanced by the powerful bond between John Howard and the outgoing President. South-east Asia is not a big part of the incoming administration’s area of focus. The State Department has always been divided between the Atlanticists and the Pacifics, and the Atlanticists are in the ascendancy. Europe will again be the principal game for the US.

We can expect the US to go cold on groups such as APEC, although that process will take a few years, and we can expect the enthusiasm for Australia to lessen. US bureaucrats will be lukewarm about the agreements Australia has secured. They’ll still be there, but we will need to remind the US that they’re in place. Kevin Rudd will have to establish a strong relationship with Barack Obama to keep Australia relevant, but he’ll be struggling to compete with voices from Europe, South America and Central America.

Will Rudd, even with his own impressive command of acronyms and cliches, be able to cut through the anguished bellows of the Rust Belt to win a place for Australia at the Obama table?