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Obama’s New Deal

Republished with permission from Social Policy Connections, an independent, ecumenical organisation, motivated and informed by Christian social thinking.

Obama's New Deal For Capitalism

 By Bruce Duncan, C.Ss.R.

Barack Obama

The world economy has worsened significantly in the last two months. The slow-down in China has been more severe than expected, with nearly 20 million migrant workers now unemployed. This downturn has sharply cut Australia’s mineral exports and tax receipts. Unemployment in Australia has risen from 3.9 per cent a year ago to 4.8 per cent (540,000) by February, and commentators expect it to rise to 6 per cent this year and about 7 per cent (750,000) in 2010. 

It is much worse in the United States. In 2008, about 3.6 million people lost jobs, lifting unemployment to 7.6 per cent – the highest since 1992 - with nearly 600,000 in the last month. Some expect the official jobless figures could rise to 9 per cent or higher.

President Obama is faced with the task of reviving the US economy, but he also sees the crisis as an opportunity to shift US economic culture away from values based on competitive individualism and to adjust the institutional framework. He wishes to spread wealth and opportunity more equitably, especially with access to health services and education for poorer groups, and to revive US consciousness of their communitarian traditions based on the values of social justice.  

The crisis in the US has been so severe that the government has effectively taken over major banks and insurance companies, measures that would have been seen as socialist until now. Yet leading business people have applauded many of Obama’s decisive economic interventions, realising that otherwise the prospects of rapid recovery were dire.

Many commentators have criticised the free-market ideologues who played such a part in extolling a culture of greed and excess. But the corruption of institutions and governance also needs to be addressed. The question will be how much can Obama help reshape American culture and economy in favour of greater equity, and not just in the USA.

Rudd, Abbot & the churches on neo-liberalism

Prime Minister, Kevin Rudd, surprised many Australians with his February essay, ‘The Global Financial Crisis’, in The Monthly. He launched a stinging attack on the ideology of ‘neo-liberalism’ that has driven economic and social change in various governments over recent decades. He was not arguing for socialism, of course, but appealed to ‘social democracy’ to rescue capitalism from its excesses and ensure that markets were well regulated.
                                
He particularly rejected theories of Friedrich Hayek and von Mises, and vigorously defended the values of social justice and social equity. Rudd drew from leading economists, Joseph Stiglitz and Amartya Sen, as well as George Soros and Warren Buffett.

In response, Tony Abbott in The Australian (7-8 February) defended the Liberal Party against Rudd’s attack by arguing that the current crisis was merely a ‘cyclical (if severe) downturn’ and that Rudd had become ‘a born-against socialist’. Naturally, politicians will try to score political points, but most commentators definitely see the current crisis as unprecedented in scale and scope.
 
Pope Benedict XVI anf Kevin RuddHere the churches have much to offer, not primarily about the technical side of economics, but about the values assumed by various policies. For instance, the Catholic Church has long regarded aspects of neo-liberalism, or ‘economic liberalism’ in its terminology, as one of its major ideological opponents. Indeed, all the major churches strongly defend social justice and equality of opportunity as integral to the mission of Jesus, drawing on the long Jewish tradition reflected especially in the prophets.

The problem is that we have very few commentators in the Australian media to explore these issues, in contrast with leading US media which give constant attention to the interaction between religion and public policy, as in the Washington Post.

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• Fr Bruce Duncan CSsR is one of the founders of the advocacy group, Social Policy Connections, and Director of the new Yarra Institute for Religion and Social Policy, based at Yarra Theological Union in Melbourne.