Saturday, 3 November 2012

Why ShiftingWealth Endorses Barack Obama

Gen Colin Powell does it; NYC Mayor Michael Bloomberg does it; The Economist magazine does it. ShiftingWealth Consulting does it, too. We endorse Barack Obama as the next President of the Divided United States of America.

Not that I am an enthusiast of the current US President: Obama has been a disappointment in many areas, including how he has dealt with the recalibration of the world economy toward China and with the relative decline of the US in the world economy.  This blog has pointed to the silly denial by the US President of the American Decline in reference to an equally silly essay by Robert Kagan in the conservative magazine The New Republic. This blog also highlighted the ludicrous speeches the US Secretary of State has held in Africa against Chinese influence, so far apart from documented empirical evidence on the development impact of China but so close to the imaginary Scheinwelt of her website.  And this blog has critically fought the allegation by the Obama administration and US Secretary of Finance Timothy Geithner that the Chinese currency was artificially undervalued to gain a competitive edge for the Asian giant. Obama has been a great China basher, indeed! Where he should have accommodated China´s rise in a cooperative fashion, he and his team badmouthed the Asian giant very much like a bad loser.

In his excellent recent Project Syndicate essay A New Low for China Bashing, the admirable Stephen S. Roach, the former chief economist of Morgan Stanley and chairman of Morgan Stanley Asia, discussed the charges that both Obama and his Republican challenger, Mitt Romney, had both brought against China, in their third and last televised presidential debate. Roach deals with them one by one, convincingly:

·         ´Currency manipulation´. 35 % real appreciation against the dollar, 32% in real effective terms with all trading partners, since 2005. Actually, the renminbi could arguably be overvalued by now (just like the Swiss franc, also accused of currency manipulation by economists employed at the Peterson Institute for International Economics).

·         ´US manufacturing jobs outsourced to China´. The US has witnessed a secular decline in the share of manufacturing jobs in private employment since the early 1970s (when China was still closed and chaotic) while other OECD have known how to benefit from China´s rise (beyond cheaper consumption in Wal-Mart).

·         ´Trade deficit´. Pardon, “In 2011, the US had trade deficits with 98 countries. The other 97 deficits did not magically appear. They are all part of an enormous multilateral trade deficit that stems from America’s unprecedented shortfall of saving” (Roach).
So why then do I opt for Obama, and not for Romney? (After all, we Romney and me are both from the private sector …J).

First, as emphasized by Roach, both Obama and Romney run the risk of painting themselves into a corner when it comes to China. But Romney is much worse. In that last presidential debate, he reiterated that he would label China a ´Currency Manipilator´ while Obama was a shade more conciliatory. Consequently, the return to cold (rather than lukewarm, under present conditions) protectionism would be more likely under a Romney presidency.To see the hawkish, militarist and retrograde approach Romney takes on China, just read his respective webpage, which hold policy recommendations that would lead the world right into cold and even hot war. Voting for Romney would provide the world with a China pitbull in the next US administration. The hatemonger John Bolton (unforgotten as George W Bush´s UN ambassador) is waiting in the wings to help him: just see his Chatham House essay.