Sunday, March 15, 2009

Hail Obama!

The most outrageous thing of last week, according to Fareed Zakaria GPS, is the provision on the recent bail-out legislation that all the institutions receiving US government money will not hire anyone who is not an American citizen. Which means that all the nations top banks, auto companies and what increasingly looks like General Electric, will not be allowed to hire any foreign born students or graduates. Accordingly, Bank of America rescinded its job offers made to foreign graduates in American Universities and more such moves will surely follow. Smart move to get jobs back for Americans, but is it?

The money that's been given out is American government money, earned from taxes on companies and individuals. When taxing, the IRS does not discriminate much for the foreign-born, and hence, foreign-born workers are making their contributions to keep these American institutions alive. Besides, it is not just what the government earns in taxes. The American government is hugely in deficit, which means that it is being lent money by governments all around the world to conduct its business. These governments send their money to America [or more correctly, buy American debt by deferring payments for goods and services they are due to paid for] because of their faith in American competitiveness, that the American industry has the necessary brainpower to innovate through the crisis and come back good.

Besides, the American government also benefits from the collective faith on a system of thinking called 'Globalization', much touted as the surest way out of poverty and misery by the American government and its funded institutions. Globalization effectively means that less restriction on the movements on inputs for production - capital and labour - and that on finished goods, will reduce inefficiencies and allow us to attain best value as consumers worldwide.

However, this measure, clearly aimed at cheering up the domestic, voting audience goes against the principle of global trade and openness, as well as will undermine the American competitiveness in the immediate term. The thinking in the American policy establishment seems to be that the foreign governments will continue to lend money to America and not ask for its money back, as America is too big to fail, and if it fails, it will drag everyone down with it.

But this is indeed a flawed line of thought. Yes, it holds true at this time and there are no alternative currency or economy competing with American bonds at this time. However, as we have seen before, the general weakening of the economy and excessive borrowing comes first, and the inability to recover from such downturn leads to general erosion of confidence in the economy and hence the debts the country holds. America is suffering from all the symptoms of such decline, save the world's faith in its inventiveness and competitiveness.

But President Obama, fresh from his historic victory and still celebrating the public adulation, has started taking the faith for granted. He has started with a seize mentality, which is natural in such times but one would hope that leaders know the way out, and currently panicking outright, as the crisis does not seem to go away. Suddenly, he is looking like the little Adolf, who needed a crowd to blame for the market's misdeeds, and he has picked up the immigrant workers.

However, these are the smartest guys from around the world, who go on to America to study and work. They have made, for generations, what American industry, science and technology are. President Obama, ironically given his background, is saying - that's it and no more - and closing the door. This will only hurt American competitiveness and help other countries - countries with forward thinking governments - to play the catch up.

So Hail Obama! then, and we shall get ready for the new world.

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