From the point of view of the world economy this is the worst Christmas season since 1933. I was five years old in that year. I cannot even remember the election of Franklin Roosevelt as President of the United States in 1932. My mother had lost her U.S. citizenship in 1920 when she married my English father, but a few days before her wedding she had had the opportunity to vote for Roosevelt himself, as the Vice Presidential candidate on the Democratic ticket. She was always a Roosevelt supporter. When she was nine months old she was held up to be kissed by Grover Cleveland in his successful campaign of 1892. That is the only election in U.S. industry in which a previously defeated President was able to come back from his defeat to win re-election. I think I may be the only survivor of the fairly large group of babies whose mothers were kissed by Grover Cleveland in is his comeback campaign.
The President-Elect, Barack Obama, seems to become more Rooseveltian day by day. He has established a close personal relationship with the American public. Roosevelt used the “fireside chat” on radio to create a very similar personal following. It seems quite possible that, at some stage, President Obama will have to face the same denigration which Roosevelt suffered. Obama, like Roosevelt and Kennedy, has surrounded himself with a group of able public servants, a “brains trust” in Roosevelt’s terms, or the “brightest and best” in terms of President Kennedy. Some of them are Republicans. That will not protect them from suspicion and animosity.
There is, as yet, no answer to the one question which really matters: “Will the new economic policy be successful in turning around the U.S. economy?” We shall not even begin to get the answer to that question until after the Inauguration, but we should get the outline of President Obama’s New Deal inside the first hundred days – as the world did with F.D.R. Like Roosevelt, Obama has been extremely reluctant to be associated with the economic policies of the incumbent President. The Democrats campaigned against Herbert Hoover in 1932, and found the experience so agreeable that they campaigned against him again in 1936, 1940, and to some degree were still using him as a campaign bogey down to 1960 – the Kennedy election. I think that George W. Bush will suffer the same fate. He will be an asset of the Democratic campaign machine for the next twenty years or more.
Unfortunately the New Deal was not really a success as a response to the Great Depression. Public works may become necessary for public reasons. That was true of the development of the U.S. highways in the 1950s, and of the electronic communications infrastructure in the 21st Century. But where the work appears to be necessary, that generates its own support for public programmes. At present, the U.S. communications infrastructure is looking obsolescent, with rusting bridges and tired concrete structures. But works cannot be planned or authorised overnight. There will be years before they provide substantial employment, and it is rising unemployment which is the immediate concern. In Roosevelt’s case, the public works of the New Deal failed to restore a full employment level until the rearmament orders – mainly from Britain – came in 1938.
The present situation is not easy to predict. Some analysts believe that there will be a recovery in the second half of 2009. That is possible, as the stock market is becoming very oversold, but it is far from certain. The credit crunch of 2007-08 is the most serious recession in the post-War period. It will not vanish when the immediate crisis is over. There will be a longer period of recovery, and more major casualties to come. I wish everyone a Happy Christmas in which to prepare for a difficult New Year. Let us hope that happy days will be here again with President Obama.
William Rees-Mogg
for The Daily Reckoning Australia
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About the Author
Leading political editor William Rees-Mogg is former editor-in-chief for The Times and a member of the House of Lords. He has been credited with accurately forecasting glasnost and the fall of the Berlin Wall – as well as the 1987 crash. His political commentary appears in The Times every Monday. His financial insights can only be found in the Fleet Street Letter, the UK's longest-running investment newsletter.
Comment by Jon Bain on 28 December 2008:
A corrupt legal system is at the root of all these problems. A tree cannot grow if its roots are corrupted. Obama should leave wealth creation to the internet and e-commerce ventures, and clean up that pathetic excuse for a legal system instead.
It is sucking the life out of everything as nobody has the CONFIDENCE to pursue anything. Monopolies destroy honest business start-ups through the 'law'. The new businesses represent the new undergrowth of the forest. As the old trees die out, and the young trees are squashed, the forest turns into a desert.