Wednesday, November 5, 2008

Barack Obama, and the Revival of the Rust Belt and Hope

The election of Barack Obama as President includes a lot of firsts. One that has received little media attention is that for the first time in more than a generation, the Rust Belt has played a crucial role in electing a President who would serve its economic interests. Since the late 1960s, the Rust Belt has drifted away from the Democratic Party (or perhaps one could say that the increasingly liberal Democratic Party drifted away from the Rust Belt). The Republicans, normally the shrewder political operators as compared to the Democrats, took full advantage of Rust Belt disillusionment to repeatedly swing crucial swing states in their direction. Yet, all this support for the Republican Party resulted in little federal economic assistance for the Rust Belt while jobs and industries shifted to the Sun Belt or other nations.

This time, Wall Street greed and mismanagement, coupled with benign neglect by financial regulators, created the recession into which the nation is now descending. Republican sloganeering couldn't shift voters' focus away from stagnating middle class incomes, increased inflation, greater unemployment and falling real estate and retirement account values. Rust Belt voters from Pennsylvania to Wisconsin and Minnesota went for the guy who most clearly promised to do something for them. In one of the rustiest of states, Ohio voters told Joe Wurzelbacher to pipe down and go back to plumbing.

None to late, either, because the United States needs to revive its manufacturing capacity. The wealth of a nation ultimately comes from its ability to produce. Wall Street's financial engineering, dabbling with derivatives and corporate takeovers all too often create little more than paper wealth that isn't worth the paper it's printed on. The Bush administration's policies make sense to the Wall Streeters who now hold senior positions in the Department of the Treasury. They wouldn't question why the banking system must be preserved. But ask a laid-off auto worker why it makes sense for the government to subsidize J.P. Morgan Chase's merger with Bear Stearns, but not GM's merger with Chrysler. Considerations of government interference with market mechanisms and moral hazard ring hollow when the government subsidizes the banking system while allowing dividends still to be paid to private bank shareholders.

America needs to strengthen its productive capability if it's going to achieve a lasting recovery from the recession. We can't afford to revive the economy again with a methadone-like dose of easy money (although that seems to be the Bush administration's principal policy). That would only set the stage for more asset bubbles and bursts. Barack Obama's election provides an opportunity to rebuild a crucial economic sector.

It will also help to restore America's standing among nations. The George W. Bush administration's record of unilateral militarism has done much to mar American's image. But John McCain's honorable conduct of his campaign--hard fought, but without Willy Horton moments or Swift Boat ambushes--avoided the rancor that delegitimized other recent presidential elections, and strengthened the nation's integrity. And Barack Obama's election vividly demonstrates to the world that America is, as it was in 1776, a nation of principles and dreams, where voters are fair-minded and are willing to look beyond the bigotry and prejudices of the past, where society and life can get better, and where anyone--anyone--with talent and the willingness to work hard can become President.

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