OBAMA IN BRITAIN

I do not usually find myself in agreement with Timothy Garton Ash but for once I think an article he wrote in the Guardian following Obama’s speech at Westminster Hall was spot on.  As Timothy Garton Ash correctly pointed out the speech with its tiresome recitation of reassuring cliches could have been made by Kennedy or Reagan or Clinton.  At no point in the speech did Obama remotely address the reality of a changed world.  On the contrary he appeared anxious to reassure his audience (both Britiish and domestic) that the world was not really changing at all.

The reality is that the US and UK (the erstwhile “leaders of the free world”) are two economies that are heavily in debt, which as they both suffer from systemic trade and budget deficits, is in both countries going to get worse. The underlying reason for this is runaway defence spending in the US.  In contrast to the situation in almost every other major economy defence spending is by far the biggest single item in the US budget.  This is so even based on official figures though it is universally accepted by all serious commentators and economists that the true extent of US spending on defence is much greater than official figures say.  Defence spending on this scale does not merely undermine the US’s fiscal position.  It is the cause of its trade deficit as factories that should be producing civilian goods produce weapons instead and as investment is diverted from the civilian economy to the defence industries.  It is the cause of the financial crisis as US banks and financial institutions have to invent ever more exotic financial instruments to trade as assets on which the US can secure its debts, which it needs to take out to cover its trade and budget deficits.  Though the UK spends only a fraction of what the US spends on defence as an outpost of the US economy it shares in its problems.

In other words it is precisely the US attempt to sustain its global leadership that is ultimately undermining it.  Rather than acknowledge this truth his speech shows that even a politician like Obama who is touted as a sober minded realist remains in denial.   

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