“All politics are local,” observed iconic House Speaker Thomas P. “Tip” O’Neill, D-Mass., in an adage that has global resonance. Your columnist spent the holiday season in London where the economic news mirrored the news at home. With layoffs mounting and home prices falling, retailers offered immense bargains to lure shoppers. But in the aftermath of the holidays, several English stores — among them the international emblem Woolworths — shuttered their doors.
Meanwhile, Britons on the economic lower rungs are struggling, even with a stronger safety net than its U.S. counterpart. A headline in the Times of London summarized the situation: “Charities, elderly and poor suffer as flow of donations slows to a trickle.” The queen’s annual Christmas Day message expressed sympathy for the economic plight of her subjects.
As in America, Britain’s leaders and opinion-shapers offered anxious opinions about the depth and duration of the downturn. Prime Minister Gordon Brown, at first unwilling to aid the Coventry-based Jaguar firm, did an about-face and offered a limited bailout after deciding Britain could not afford to lose this automotive symbol. Sound familiar? Strictly speaking, Britain has already lost Jaguar, which is part of Jaguar Land Rover, a company owned by the Mombai-based firm, Tata Motors, whose worldwide sales are slumping. Meanwhile, one of the hottest selling books in Britain is The Ascent of Money by the Scottish-born Niall Ferguson, which asserts that the United States is overstretched and has become part of a “dual country” he calls “Chimerica” in which China has become the principal banker of the United States. The book is doing well on our shores, too.
What is not doing well in Britain or America — or in China, for that matter — is the economy. Housing prices are falling and manufacturing orders declining at greater rates than economists had predicted. In Britain, more than here, there is a persistent awareness of the global nature of the recession. It shows up in media commentaries and in such unexpected places as a sermon by John Sentamu, the Anglican archbishop of York, who answered a biblical question with a response that any savvy, secular investor could understand. “Am I my brother’s keeper?” asked Sentamu. “Yes, I am. The impact of what happens with a sub-prime mortgage in America has an impact upon my brother employed in Newcastle, working for Northern Rock.” (Northern Rock is a big British bank that collapsed because of risky lending and was taken over by the government.)
Such globalist views are accompanied in some quarters by resentment over the U.S. role in triggering the global downturn but also by hope that the incoming Obama administration will lead the recovery. Brown, who often and somewhat melodramatically compares the challenges of the global economic crises to World War II, said in his New Year’s address that he looked forward “to working with President-elect (Barack) Obama in creating a trans-Atlantic, and then a global coalition for change.” It comes as no news flash to say that President Bush is deeply unpopular in Britain. As at home, Obama’s biggest problem may be that expectations are higher for him than anyone could possibly fulfill.
Expectations are lower for Brown, and the Labor Party leader appears to be exceeding them. Under Britain’s electoral rules Brown is not required to call a parliamentary election until June 2010, although he can do so before then. In terms of the British economy, the dour but resolute Brown is cast alternatively as Bush and Obama, first the problem and then the solution. A year ago Labor hopelessly trailed the resurgent Conservatives in public opinion polls. Brown has since closed the gap with a display of resolute optimism and a program of bank nationalization, tax cuts and economic stimulus.
Britain, however, may have less long-term running room than the United States. Real public debt in Britain is 80 percent of annual gross domestic product (GDP); even if the entire Obama stimulus package is approved the U.S. figure in 2009 will be about 55 percent.
In both Britain and the United States, the federal government, with its ability to unleash massive spending endeavors, is seen as the main engine with the power to end the recession. The intellectual architect of this approach is the British economist John Maynard Keynes, who to paraphrase Robert Reich, saved capitalism by persuading government to spend money it didn’t have. President Franklin D. Roosevelt, whose New Deal Obama seeks to emulate, was the most eminent Keynesian but it’s worth recalling that conservative economist Milton Friedman said decades later,” We are all Keynesians now.” In the waning months of the Bush administration the Federal Reserve is printing money and Treasury is spending it at a pace that would satisfy even the most ardent New Dealer.
While the federal government directs the effort, much of the spending in the United States is distributed through state and local governments. So returning to our country, it was astonishing to find columnist Paul Krugman in The New York Times denouncing U.S. governors as “fifty Herbert Hoovers” because they are trying to balance their budgets instead of pump-priming. Krugman may be a Nobel Prize-winning economist, but he apparently knows little about state government. Most governors are required by law or their state constitutions to submit balanced budgets, and the vast majority do so. Ignoring the rule of law will not advance either economic recovery or democratic reform.
Where the governors can help, as they did in influencing many routings of the Interstate Highway System during the Eisenhower administration, is in identifying key infrastructure projects in their states that will have lasting importance. The United States is embarking on a massive restructuring of its transportation and energy systems, and it is the duty of the states to help see that this money is spent wisely. “Pay to play,” a phrase now made newly notorious by Illinois Gov. Rod Blagojevich and the better-regarded New Mexico Gov. Bill Richardson, will not get it done.
There is much else that states can do. Below the national radar, Illinois, Michigan and New Jersey are investing in local banks and credit unions that haven’t qualified for the federal bailout of big banks. Florida, Ohio and Vermont have passed their own stimulus plans even while economizing to balance their budgets. New Jersey innovatively tried to bypass the frozen municipal bond market by launching a Web site to sell bonds to the public.
Such innovation would come as no surprise in London, where the idiosyncratic Conservative Mayor Boris Johnson, has, as Newsweek puts it, been “unrestrained by the strict left-right divide” of British politics. Johnson won a surprise victory last year after promising a greener London that was free of the cronyism that has marked its recent governance. He has praised Obama, modeled himself after New York Mayor Michael Bloomberg, and more important raised London’s “living wage” to $11.17 an hour, nearly 35 percent higher than the national figure.
Tip O’Neill was right. Even in the age of globalism, politics is local.
— Summerland resident Lou Cannon is a longtime national political writer and acclaimed presidential biographer. His most recent book — co-authored with his son, Carl — is Reagan’s Disciple: George W. Bush’s Troubled Quest for a Presidential Legacy. Cannon also is an editorial adviser to State Net Capitol Journal, which published this column originally.