Obamanomics: The View From Down Under

Hope is a much-underrated emotion in economics. Yet hope is especially important at a time of global financial uncertainty around the world — particularly in the United States.

After all, the United States is the world’s largest economy. And, despite Australia’s strong export connections to the emerging economies — particularly in Asia — the United States has always been an important source of capital investment and confidence for us, as well as for other nations across the globe.

Exporters virtually everywhere see a rough 12 months ahead, with China, India, ASEAN and the Middle East generating most of their sales.

But according to surveys, many think the United States will rebound strongly with the election of Barack Obama as president — potentially helping to turn around this hopeless sentiment.

However, Obama’s election has generated some negative press in business circles here in Australia and elsewhere. The conventional wisdom has been that Democrats are always trade protectionists — and the Republicans firm free traders.

For example, in his Boyer lectures, Australian-born Rupert Murdoch claimed that the Democrats are always protectionist — and Obama’s trade policies would hurt Australia. His views are echoed by others, such as Australian Industry Group’s Heather Ridout, who represents Australian manufacturing businesses.

But as I see it, this is a misreading of history. Both parties have moved on both sides of the trade issue depending on the times. In fact, the Republican Party was originally the party of the northern states. It therefore had a large manufacturing and big business base of support — and supported protectionism.

Meanwhile, the Democrats were strongest in the South and Western frontier and supported modernizing industry, raising taxes and free trade. American farmers and the labor movement have had their swings, too. The AFL-CIO and the auto workers were pro-free trade in the 1950s and 1960s — and later became protectionist.

One also has to take the political economy of the primaries into proper account. Barack Obama’s views on trade in the primaries are likely to be very different from the policies of his administration.

To win primaries, a candidate has to win the affections of party activists who are more likely to be protectionist than the electorate as a whole. But once a candidate is elected, the realities of governing and dealing with other powers, is a whole new ball game. And history is a guide to this. Past Democratic administrations — led by Roosevelt, Truman, Kennedy and more recently, Bill Clinton — were multilateralist and internationalist in outlook, despite their primary sentiments. The Obama Administration is likely to follow the same precedent.

As the Chicago-based economist David Hale explains, “Obama was born to an African father and grew up partly in Indonesia and partly in the mid-Pacific in Hawaii. His background is internationalist in outlook — and there is no way that someone with that background is going to be isolationist or protectionist in economic policy.”

In addition, most of Obama’s likely economic advisers are for free trade. For example, Jason Furman, a former World Bank economist and senior advisor to the Obama campaign, is a strong free trader. Another top adviser, the University of Chicago’s Austan Goolsbee, holds similar views.

For additional proof, look no further than the fact that before the election, around 66% of U.S. economists who are members of the American Economic Association said they would vote for Obama — compared to 28% for McCain. The majority of economists in the United States are free traders.

Inequality and skyrocketing executive salaries, paired with declining real wages for average U.S. workers, have bred protectionist sentiments. In contrast, a fairer America may actually build a stronger constituency for free trade.

In fact, Obama’s programs to reduce economic inequality may strengthen, not weaken, support for free trade in the U.S. electorate. Supporting a minimum wage and workers’ rights to organize could reduce the excesses of globalization and build a progressive coalition for open trade.

After all, you just have to look at Obama’s home base of Chicago. Over the years it has diversified its economy and risen to pre-eminence as a truly globalized city — and was just voted the world’s 8th most global city by Foreign Policy magazine.

The Obama Administration’s clean energy policies could mirror Chicago’s own environmental programs, including its push for green roofs — which now number about 400 in the city that is the original home of the skyscraper.

Obama’s win will also help the Chicago “brand.” Accordingly, there are already those who believe that Chicago’s Olympic bid for 2016 has been bolstered by Obama’s win. For ages, Chicago has only been associated with Al Capone — and Michael Jordan of the Chicago Bulls.

But now, with the election of Barack Obama and a potentially successful Olympics bid, there is new hope to put the Windy City on the world stage where it belongs.

There’s that word again — hope.

That sentiment saw the election of America’s first African-American president and now needs to play a role in the revival of the U.S. economy for the good of exporters and the whole global community.

But whatever happens on the economic front, we already know that the 2008 U.S. presidential elections — and that balmy November night in Grant Park, Chicago — have made a difference.