In the US, both the Republican Party and the Democratic Party have held their convention to elect their respective party’s nominee for the presidential elections due in November.
As expected, it will be a race between Barack Obama and Mitt Romney. The political analysts will surely have their say in the assessment of the two candidates and I would not like to delve into a political analysis of the two personalities.
However, we have also to keep in mind that the US is the world’s largest economy and as such, the performance of its economy and its policies have a significant impact on the EU as well as the rest of the world.
Because of the openness of the Maltese economy, this impact would in turn produce an impact on our economy as well.
It is interesting to note that the two conventions seem not to have answered all the questions there were about Obama and Romney, especially on the economy. Maybe the small difference there is in terms of the popular vote between the two candidates has led them to believe that they need to be flexible in their policy statements not to upset any particular segment of the US electorate.
The question that is being asked of Obama is what he would do in the next four years if he were to be re-elected President.
He did become President just after the collapse of Lehman Brothers and in the middle of a meltdown of the international financial markets. He inherited a deficit brought about by uncontrolled spending perpetuated during the previous administration.
Two big car manufacturers were gradually but steadily moving towards bankruptcy while employment and output were decreasing.
Some have claimed that never had an American President have had to face such a situation on taking office, at least not since the time of the Great Depression.
Obama’s supporters claim the President should take credit for the fact that the situation did not get worse, thanks to the stimulus package he introduced. Obama also enjoys a good record for his trade policy as he avoided a trade war with China.
However, the employment situation is still fairly negative and has done little to rein in the fiscal deficit, possibly because the Republicans used their majority in Congress to obstruct the President’s initiatives.
These results may show that Obama deserves to be re-elected but no one really knows what to expect from him if he were.
Romney is not in a better situation at all. He came out with a detailed 59-point economic plan which avoided all the thorny questions. He has also contradicted himself on a number of occasions.
He speaks of bringing down the deficit but later speaks of reducing taxation. He is claiming that he wants to reduce spending but later claims he wants to increase spending on defence.
On certain other issues he does not propose any alternatives. He declares he wants to reduce the financial regulation brought in following the collapse of Lehman Brothers but does not say what he wishes to replace it with. Does he intend to go back to the regulatory system the US had before the crisis?
The weak economy may encourage voters to go for Romney. However, a politician without a credible economic plan may become a politician not to trust. So does a politician who wants to be all things to all people and who changes his stance depending on the audience he is addressing. Thus it comes as no surprise that no one really knows where Romney wants to take the world’s largest economy.
The American scene does not present much certainty about the options on economic policy. This uncertainty may eventually even dwarf the crisis in the eurozone.
All this will no doubt have a ripple effect on our economy, which may be rather softer next year than it has been this year.
What the American scene tells us is that Malta cannot afford to have uncertainty on its economic direction as we run the risk of transforming that uncertainty into a catastrophe.