Business Page –  A view from America

Sunday, February  5th, 2006

Introduction:

As the caption shows, this Business Page is being written from United States but it is deliberately not entitled 'Letter from America' which would be too ambitious and would breach the copyright of the late and great Alistair Cooke. Nor is it the beginning of some equally ambitious career in travel writing or perhaps more modestly travel journa-lism. It is simply an article written after one week in the US and observing from the comfort of the sitting room the goings-on in the mighty America that is suddenly beginning to doubt its own greatness even as it is still considered the world's only superpower. But not for long.

The week - or more accurately ten days - saw a number of important events taking place in the USA, the most important of which was the fifth State of the Union Address, the American equivalent of the Throne Speech of the United Kingdom in which Her Majesty outlines the Parliamentary agenda of the government. But there were other developments that have some relevance to and resonance in Guyana. The trial of Kenneth Lay and Jeff Skilling - the alleged masterminds in the mother of all corporate governance abuses; the confirmation of Justice Samuel Alito Jr as the 110th Justice of the Supreme Court; the hearings in the New Orleans disaster; the trial of a super-lobbyist who had many in the US Congress and Senate in his pocket; and an issue raised in Business Page late last year, the changing of the guard at the Federal Reserve, the US equivalent of a central bank. At the individual level the country mourned the death from cancer of Coretta Scott King, the wife of the late Civil Rights icon, the Rev Dr Martin Luther King Jr; while in the arts a motion picture that shatters the macho image of another American symbol - the cowboy - in which the two leading players are homosexuals - is now tipped for Oscar glory. That is a lot for any country, even one that is as big and disparate as the United States.

The State of the Union :

Dubbed by one columnist as the 'State of Delusion Address,' the finished product was the culmination of at least thirty-five drafts, lasted for approximately as many minutes plus applause by Congress and Senate Republican members and their invitees, and grimaces by Congress and Senate Democratic members and their invitees. With free speech being one of the pillars of that society, the Washington police quickly apologised for booting out from the visitors' gallery Cindy Sheehan, an Iraq War protester whose son died in the war, for wearing a tee-shirt with the number of the war dead emblazoned on the front. Of course by the time the apology came the damage had already been done and the matter is now the issue of a lawsuit - as popular in the US as apple pie or turkey.

Despite having at least two recently won trophies to show off to the world - the confirmation of the new Supreme Court judge and the successor to Dr Alan Greenspan - President Bush, who was giving his first address since his real elections victory in 2004, appeared decidedly less confident and upbeat. Soon after that victory Bush boasted that it had earned him political capital and that he intended to use it. One year later, wounded by bad news from the war front, a faltering economy, the failure of his grand plans to reform Social Security and damaged by scandals involving many of his own people, he was a pale shadow of himself with much of that political capital spent. Indeed as one Democratic Senator said, he was coming to the House chamber "to borrow."

Perhaps the most memorable or maybe least unforgettable statement was the one that America was addicted to Middle East oil and that he would begin the process of weaning the country from that unreliable source. This statement was also remarkable for two reasons: it really was nothing new except that oil prices are likely to feature as a serious bread and butter issue in the upcoming mid-term elections, and the question of American disproportionate use of the non-renewable resource had been a recurrent if not urgent theme of earlier addresses - but more importantly, what of all the billions being spent on democratizing the Middle East and making it more stable?

It was also remarkable for another reason. Bush is himself a Texan (failed) oilman but instead of talking of America drilling itself out of its energy greed, he spoke of alternative sources, including some of which Guyana's neighbour Brazil has already perfected. Among the plans is increased investment "not just from corn but from wood chips, stalk or chip grass," prompting one late-night Talk Show host to call it the "No Tree Left Behind Initiative," after his earlier 'No Child Left Behind' education plan.

Recognising the imbalance of trade with China in particular, Bush also announced the American Competitiveness Initiative to encourage innovation throughout the economy and to give the American children "a firm grounding in math and science." He even announced plans to trim the budget and reduce the large deficit which he created with his irresponsible tax policy of enriching the wealthy at the expense of the middle class and the poor. Larger budgets do not seem the virtue they are in Guyana.

NCN:

No sooner had he finished than the Democrats gave their own nationally televised response (is NCN listening?), in which they accused the President of having compiled a record of favouring special interests and accused the administration of "poor choices and bad management." The response given by one of the Democratic new boys, Governor Timothy Kaine of Virginia elected less than three weeks ago, tellingly and rhetorically noted that no parent leaves the mortgage to be paid by the children, but that the Bush administration was passing down the bill for its reckless spending to the children and grandchildren.

No issue of half-omission, however, aroused as much anger and fury as Bush's almost footnoted comments on Katrina and its effects on the people of the Gulf Coast and New Orleans. He re-stated how much the administration had spent on the hurricane without mentioning that the bulk of that sum had been allocated to the Federal Emergency Management Agency, the discredited national emergency response body whose head was fired shortly after Bush had praised him in the most memorable quote of 2005, "You're doing a hell of a job, Brownie."

Bush's credibility with African Americans is hardly likely to improve after the address.

New Orleans:

While this was taking place, two Congressional committees were conducting hearings on the federal and state responses to Hurricane Katrina which hit the Gulf Coast in the worst year of hurricanes ever recorded in the US. That the US Senate might think such hearings necessary would probably surprise our President Jagdeo, since everyone knew that the disaster was a result of the failure of the levees protecting the city brought about by the Category 5 hurricane.

The administration has also resisted providing copies of correspondence the hearings consider relevant to their work, citing the confidentiality of executive branch communications. This has prompted a threat by Senator Lieberman that he would ask for a subpoena for documents and testimony if the White House did not comply, a position that has received support from some of the President's own people on the panels.

Audit:

And adding to the administration's woes was the publication of a report on a special audit done of the financial practices in Iraq disclosing irregularities, including millions of dollars stuffed casually into footlockers and filing cabinets, the gambling away of Iraq funds by an American soldier and sloppy construction work which had been certified as having been properly done.

One person associated with certain of the irregularities and whose past record ought to have ruled him out of any position of trust has already pleaded guilty and is now serving time.

Jail for tax dodger

Richard Hatch, the winner of a $1 million prize on the popular TV programme Survivor was found guilty of failing to pay taxes on his winnings and is facing thirteen years in jail despite the plea of his lawyer that his client is the "world's worst bookkeeper." While the judge indicated that he expected a sentence of between 33 to 41 months, the fact that Mr Hatch committed perjury in his testimony could work against him.

Enron again:

Kenneth Lay and Jeffery Skilling, who in the court of public opinion not only in the US but across the world, represent the worst face of corporate governance for their role in the demise of the energy giant Enron, the darlings of Wall Street and academia for much of the nineties, are finally in court. Prosecutors have systematically worked their way up the chain of command through a series of plea bargains with smaller fry who are now themselves serving time for their own roles in what has been described as accounting "hocus pocus."

It is a tale of lies and deception by the company to investors and shareholders, which in a market that requires accurate and reliable information is a venal sin that requires its perpetrators to be put in handcuffs. What a contrast with third world countries with backward and pliable securities markets!

And finally...

Dr Alan Greenspan has now given way to Ben Bernanke as the Chairman of the Federal Reserve amid some uncertainty and nervousness concerning whether Bernanke can fill the outsized shoes of his predecessor. Greenspan has presided over the remarkable growth of the US economy even during the worst wave of corporate governance failures, and his greatest achievement is considered his taming of the inflation tiger.

But the timing could not be more challenging for Bernanke as the US economy is slowing and the housing market set for a downturn after several years of frenzied growth. The major challenges to the US economy are reflected in the increasing budget and trade deficits spurred by the growth of imbalanced trade with the China, and to a lesser extent India.

America promoted free trade and globalization like the Crusaders promoted Christianity. They got China and India. They promoted democracy across Latin America and the Middle East. They got Morales and Hamas. They need to be careful about what they wish for.