OBAMA’S PROMISE OF CHANGE MAY NOT BE WHAT BUSINESSES ARE HOPING FOR
Today’s Zaman
Nov 8 2008
Turkey
US President-elect Barack Obama makes an opening statement on the
economy with a group of advisers during a news conference in Chicago
on Friday.
With the election of Obama as the 44th president of the United States,
the headlines of papers in Turkey are almost universal in praising
the "hope" and "change" that the first African-American president
has promised to bring with him to the White House.
This opinion seems to be repeated across the sociological spectrum from
Kurdish villages in Anatolia to Turks in glass towers in Ä°stanbul
and taxi drivers in broken down TofaÅ~_ cars. Business leaders have
also put this almost parrot-like cliché in all the pronouncements
they have made looking forward to the "hope" and "change" that the
administration will usher in.
Exactly what this "change" and "hope" means for business leaders,
therefore, needs to be clarified because it would seem that the
"change" and "hope" desired by business leaders is very different from
that desired by other segments of society. Indeed, speaking Friday
in Antalya, Turkish Union of Chambers and Commodity Exchanges (TOBB)
President Rifat Hisarcıklıoglu, attempted to describe what "change"
means to business when he declared: "I believe the change will have
its reflection in both the US government and the world environment
because the US economy is one-fourth of the world economy. … Obama
has a different understanding, and with the positive expectations of
people, he will affect the economy well."
But, if election campaign promises are anything to base one’s opinions
on, it would seem that from a purely business perspective, Turkish
businessmen’s wishes would be for anything but the "change" and "hope"
that the president-elect has promised.
"Rationality" (long a concept central to economic theories of the
"market man") would dictate that Turkish business leaders who have been
dealing with America would thus desire several key characteristics in
any prospective American president’s policies: 1) openness to trade
with the world and specifically with Turkey, 2) good diplomatic
relations with Turkey, 3) a beneficial tax structure that would
signify a generally supportive stance towards the business community,
4) overall support for globalization and 5) a force of stability in
its region. From a purely business perspective, Obama does not seem
to be a source of "hope" for any of these issues.
In fact, it would appear that Obama’s election pledges — complete with
their inward looking trade promises, an increasingly protectionist
slant and promised Congressional bills, which, if implemented would
damage bilateral relations with Turkey — are purely against the
interests of business.
Like all leaders of Turkish-American business councils that Sunday’s
Zaman polled, Galip Sukaya, the chairman of the American Business Forum
in Turkey (ABFT) was of the opinion that "America should be proud" for
their election of Obama, who is the ultimate symbol of the American
dream: an African American, descendent of an immigrant father, from
a broken family who was nonetheless able to beat the odds, complete
law school at Harvard and go on to be elected the leader of the free
world. When asked by Sunday’s Zaman on the phone Thursday about trade
relations, Sukaya also expressed confidence in brightening economic
horizons under Obama and increased trade relations.
Getting non-political stances out of leaders about their respective
countries’ business policies is like pulling teeth. However, when
the matter of trade relations and general business relations was
investigated further, Sukaya revealed that he did in fact have a
reservation: "My only concern is about the Armenian resolution… if
he passes it, there will be problems."
Obama has long vowed to support Armenian genocide claims, declaring
on his official site, "As a US Senator, I have stood with the
Armenian-American community in calling for Turkey’s acknowledgement
of the Armenian Genocide." Last year the House Committee on Foreign
Affairs voted 27-21 in favor of a resolution describing the 1915
incidents as genocide against Armenians, and the vote was only
postponed by the House to a later date. It remains to be seen what
will happen with Obama in the principal seat in the White House.
Indeed RahÅ~_an Cebe, a managing partner at Cushman and Wakefield
in Ä°stanbul, expressed the same "main concern" and was fearful of
anything being done by Washington to disturb the warming relations
between Ankara and Yerevan. "Turks are very emotional, and it would be
a shame if anything was done to disturb the air," not only for warming
Turkish-Armenian relations, but also for US-Turkish business relations.
Referring to Obama’s relations with Turkey, Cebe said, "I don’t know
him well… [and] I don’t know how well he knows Turkey," but was
"hopeful" that Obama would rely on the right advisors. Bush’s recent
appointment of James Jeffrey, a man who knows Turkey very well,
as the new ambassador to Turkey further increased her "hope."
Obama’s FDI policy causes concerns
When probed still further, Sukaya’s "only concern" grew into "other
concerns." For starters, Sukaya revealed that there were concerns
on the part of many businesses that Obama will make it increasingly
difficult for American businesses that wish to operate abroad or make
foreign direct investment (FDI). Obama’s proposals to provide yet to be
disclosed tax credits and other incentives for companies who invest at
home rather than abroad, or "outsource" in popular terms, has struck
a louder chord in recent months amongst voters as recession grips
the country and as unemployment figures rose to 6.5 percent in October.
If affected, this promises to pose substantial difficulties for many
Turkish companies — and the economy as a whole — which benefit
strongly from American FDI inflows to Turkey. In 2007 American sources
contributed to over $4.2 billion in FDI to Turkey — American sources
are officially estimated to be the largest supplier of FDI — and
American companies contribute countless billion in spin-offs in the
country. If Obama’s "change" in this area is realized in his desire to
keep investment at home, then many Turkish businesses will certainly
not have much to "hope" for.
Indeed, business leaders who had less of a political role to maintain
spoke much more frankly about what they felt were the dangers posed to
Turkish business by an Obama administration that keeps its election
pledges of "change." Jeffrey Kemprecos, external affairs director at
Merck Sharp & Dohme, was one such businessman. In addition to Obama’s
insistence on maintaining corporate tax rates at 35 percent — the
highest in the Organization for Economic Cooperation and Development
(OECD) — Kemprecos highlighted Obama’s stance on trade and the desire
to keep jobs at home as being a negative indicator of the development
of stronger trade relations between American and Turkish companies
and the overall flow of capital. As evidence of the "non-friendly"
business stance Obama took, he pointed to Wall Street’s 500-point
drop the day after the election — the largest drop on the first day
after an election.
Another concern expressed by Sukaya was Obama’s tax strategy in which
"change" would bring increased taxation to American taxpayers who
earn more than $250,000 per year. Amongst the proposed tax plans
is an increase in the capital gains tax to 20 percent for those
families with incomes above the $250,000 mark. Sukaya’s concern was
that this would hit investors — Turks included — and cause a shift
in the investment strategies of both Turks investing in America and
Americans investing in Turkey.
Upon further probing, Sukaya expressed his "other concerns" about
a possible inward orientation whereby the administration would
begin focusing on domestic issues. Indeed, this has at least in
part been a component of election run-up rhetoric designed to
keep "jobs at home." If Obama’s statements with respect to NAFTA,
which he has described as "devastating" and a "big mistake," and
his threats to pull out of the agreement unilaterally if it is not
renegotiated are any indication of his stance with respect to trade,
Turkish businessmen indeed have something to worry about. "Change"
would certainly not appear to be in their best interests. If Obama
maintains his campaign pledges to begin troop withdrawals as part of
a plan to "bring the boys home," then "change" in this area as also
likely spell problems for the Turkish business sector.
Speaking with Sunday’s Zaman yesterday, Dr. Ä°brahim Al-Marashi, a
Middle East historian and expert on Iraq, argued that there were in
fact a number of risks to Turkish business if Obama were to pull out of
Iraq. Although he noted that most of the Turkish investments in Iraq
were in large infrastructural projects in the Kurdish northern region
of Iraq and that this would not be much affected since it is already
self-policed, a US military withdrawal would lead to the very real
possibility of the Iraqi military being divided along sectarian lines
and civil war breaking out as Shiite and Sunni militias pick up arms
once again. However, a number of the largest Turkish conglomerates,
he said, are very active in distribution outside of northern Iraq, and
their interests would be seriously damaged. Moreover, a destabilized
Iraq would likely have larger geopolitical implications for Turkish
interests and may well spill over into the economic realm.
The only substantive "hope" that could be deciphered from the comments
of businessmen discussing the "change" Obama promised came from Ugur
Terzioglu of the Turkish American Business Association (TABA/AmCham),
who hoped Obama "won’t do what he said."
The differing perspectives of business leaders and the chairmen of
business councils in part reveals the contradictory roles that business
leaders in bi- or multilateral business associations are expected to
fill. On the one hand, they are to represent the interests of their
constituents and articulate clear messages both to and from their
members. On the other hand, the position is somewhat political, and
members need be careful not to damage relations through criticisms
of government policies.
Obama says will confront economic woes head-on
US President-elect Barack Obama said on Friday the United States was
facing one of its greatest economic challenges and vowed to confront
the crisis head-on as soon as he takes office in January. Investors
are awaiting Obama’s choice of Treasury secretary who will spearhead
economic recovery, but Obama made clear he would not be rushed into
making hasty appointments. "I want to move with all deliberate haste,
but I want to emphasize deliberate as well as haste," he said.
At his first news conference since being elected on Tuesday, Obama
noted the latest Labor Department figures which showed that US
unemployment hit a 14-year-high in October after employers slashed
jobs by an unexpectedly steep 240,000. "We are facing the greatest
economic challenge of our lifetime and we’re going to have to act
swiftly to resolve it," Obama said, as his team of economic advisers,
who include businessmen and economists, stood in a line behind him.
The brief news conference in Chicago followed a meeting with his
17-member transition economic advisory board on how to tackle the
worst economic crisis confronting the United States since the Great
Depression of the 1930s.
Obama said he wanted the Democrat-controlled US Congress to pass
a second stimulus package as soon as possible to stabilize the
economy, which analysts say may be in deep recession by the time he
is inaugurated on Jan. 20. "We are going to need to see a stimulus
package passed either before or after the inauguration. I want to
see a stimulus package sooner rather than later."
With US automakers also reporting billions in losses on Friday,
Obama urged the Bush administration to accelerate a $25 billion
retooling assistance plan already passed by Congress. The automakers
are lobbying for up to $50 billion to prevent a collapse that could
cost over two million jobs.
In his first foreign policy pronouncement as president-elect, Obama
called for an international effort to prevent Iran from developing a
nuclear weapon, a day after Iran’s president urged him to implement a
"fairer" US policy in the Middle East. Obama, who has said he does not
rule out direct talks with Iran’s leaders, also called on Tehran to
end what he called the country’s support for terrorist organizations.
Obama said he would be reviewing a letter from Iranian President
Mahmoud Ahmadinejad, congratulating him on his election, and would
"respond appropriately." But he said the US approach to Iran could
not be done in a "knee-jerk" fashion. "I think we’ve got to think it
through," he said. Chicago Reuters
Top contenders for economic posts under Obama
US President-elect Barack Obama said on Friday he wanted "to move with
all deliberate haste" to pick people for top posts, but said it was
important to get it right and not be unduly rushed. With a financial
crisis raging and the US economy facing a possibly deep recession,
the selection of key economic advisers is believed to be at the top of
his to-do list. Here are the main contenders for senior economic jobs:
Treasury Secretary
Lawrence Summers: He was Treasury secretary under Bill Clinton and is
the former president of Harvard University. Summers’ tenure at Harvard
was marked by conflict with faculty and other controversies but Wall
Street held him in high regard during his time at Treasury. Summers
has been a top adviser to Obama, especially after the financial crisis
intensified in mid-September. He gained seasoning as a financial
firefighter during the 1990s when he grappled with the Mexican peso
crisis, the Asian financial flu and the Russian financial crisis.
Timothy Geithner: As president of the New York Federal Reserve Bank,
Geithner has played a lead role in efforts to stabilize financial
markets. He has argued that banks crucial to the global financial
system should operate under a unified regulatory framework. He worked
with former Treasury secretaries Robert Rubin and Lawrence Summers
as undersecretary for international affairs during the Clinton
administration.
If Obama taps Geithner, the New York Fed would want to move quickly
to replace him given the crucial role the regional Fed bank plays on
Wall Street.
Jon Corzine: The governor of New Jersey and former US senator is a
one-time supporter of Sen. Hillary Clinton, whom Obama defeated for
the Democratic party nomination. The former chairman of investment
bank Goldman Sachs appeared in Chicago at an economic summit with
Obama, and has helped articulate the candidate’s program to curb
speculation in energy markets. He told an interviewer on Wednesday
that he has had no discussions about the job.
Laura Tyson: The former chairwoman of Bill Clinton’s Council of
Economic Advisers, who also served as his National Economic Council
director, is seen as a possible long shot for the Treasury post. She
is now a professor at the University of California, Berkeley and
was tapped as a key adviser to Obama after he secured the Democratic
nomination for president in June.
Director of the Office of Management and Budget
Peter Orszag: Has been director of the non-partisan Congressional
Budget Office since January 2007 and previously served as an economic
adviser to President Clinton. A specialist on tax and budget policy,
Orszag has also focused on Social Security reform, one of several
difficult issues that will face the new president. Before heading
CBO, Orszag was a senior fellow at the liberal-leaning Brookings
Institution.
Director of the National Economic Council
Jason Furman: Obama’s top economic policy coordinator and close
associate of former Treasury Secretary Robert Rubin was tapped shortly
after Obama clinched the Democratic nomination on June 3. He was an
aide in the Clinton White House and worked with Rubin on the Hamilton
Project, a centrist research organization that promotes policies such
as free trade and fiscal discipline. Furman’s reputation as a backer
of free trade initially concerned some of Obama’s union supporters.
Chairman of the Council of Economic Advisors
Austan Goolsbee: The University of Chicago economist specializes in
tax policy and has written extensively on the role of the Internet
and technology in the economy. A long-time adviser to Obama, Goolsbee
has been a major player in shaping the president-elect’s economic
plans. He sparked controversy in March after he met with Canadian
officials. A leaked memo suggested Goolsbee played down Obama’s
opposition to NAFTA. The Obama campaign said the memo was inaccurate.
US Trade Representative
Dan Tarullo: A professor at Georgetown University law school, Tarullo
specializes on trade and international economics. He was a senior
White House aide to Clinton and did preparatory work for meetings of
the Group of Seven industrialized economies. Tarullo has said Obama
supports free trade but wants to ensure workers are protected from
unfair trade practices.
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