Obama: Turning the Economy to the Left

Obama’s victory has triggered a wide discussion, including on the American people’s wish for change and the new president’s personal charisma. One way or the other, what matters more and what is more profound in the midst of the current financial turmoil is the quiet shift of the orientation of the fundamental economic policies and concepts.

It was during the financial turmoil and the sub-prime mortgage crisis that a general re-alignment, including that of the global dominant economic trend, has made a “left turn”, advantageous to Obama.

The situation reminds us a lot of what John Maynard Keynes once said:

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.

The dominant economic trend switched many times in the last century. From the 1940s to 1970s, the Soviet Union’s planned economy reached its peak and led to global concern about the planned economy and government intervention in the economy. And then in the late 1970s, Reagan’s economics in the U.S. and Thatcher’s reformation in the U.K. both indicated that the dominance of the school of the free market economy. Beginning in 2007, and ever since, the sub-prime mortgage crisis, the one that has caused the financial tsunami, could not help but raise questions all around the world regarding the free market economic system.

From the perspective of U.S. economic policy, Obama’s victory can therefore be understood more as a change in the world’s dominant economic policy orientation. Therefore, to a large extent, a fight between two economic schools laid behind the competition between Obama and McCain.

When Obama’s victory and his potential economic policy are put in a larger contect, to say he is “turning left” might be an over-simplification. For Obama’s expert supporters, the free market economy and globalization are still the consensus. Then, what will be different is that when the market is risking going out of control and can no longer hide its weakness, Obama and his “turning left” perhaps should be become more to the fore, active and driven.