Dispatches from the Potomac#22 | Change is Necessary, but Hard - The United States in Transition

This is the 48th edition of this column, which first appeared in the March 2009 issue of the Marubeni Group newsletter "M- SPIRIT." This is my last contribution to this column. For my final essay, I would like to summarize the changes in the US over the past eight years.

This is a translation of an article originally written in October for publication in the November 2017 edition of the Marubeni Group Magazine, M-SPIRIT.

Washington D.C. Office General Manager, Marubeni America Corporation    Takashi Imamura

Although a Great Depression Was Averted….

As mentioned in the first edition* of this column, the inauguration ceremony of former President Obama was held in January 2009. At that time the US was facing a serious financial crisis, the situation in both the market and the economy was as frigid as the weather on inauguration day. A crowd of approximately 1.8 million people attended, the highest ever recorded at an inauguration ceremony, evidence of an expectation that the revitalization of the US was being staked on President Obama.

The Obama administration fulfilled those expectations to some extent. With economic and monetary stabilization measures by the administration and super-quantitative easing by the FRB, the stock market prices, which had been plunging, bottomed out in the spring of 2009, and the economy started on a recovery trend a few months later. The economic expansion that began then is still continuing today. The Obama administration and the FRB should be receiving greater recognition for achieving even a moderate economic recovery for the US economy that was facing the fear of a second Great Depression.

Nevertheless, it is significant that the evaluation by voters was not so high. This economic recovery has mainly benefited corporations and those in the high-income brackets, while the majority of American citizens in the middle-income brackets or lower have been unable to feel any sense of recovery. For the Obama administration and the Democratic Party, the political costs were enormous, leading to a series of poor results in congressional elections and a defeat in the presidential election in 2016.

The policy of continuing super monetary easing and encouraging the leveraging of asset prices was an appropriate response to the serious financial crisis at that time. In fact, it was probably the only option. The miscalculation of the previous administration was that these measures did not have a ripple effect to a wide range of sectors or lead to an acceleration of economic expansion, with corporate management becoming more conservative, and a widening gap between household income levels. The recovery of employment was also slow, with the unemployment rate remaining high at around 8% just prior to the presidential election in 2012. It would not have been surprising if this had prevented Mr. Obama from being re-elected.

The first edition is not posted on the corporate website.

Changing Too Fast

Nevertheless, President Obama succeeded in winning re-election, and maintained steady support until the end of his term. It may be that many voters felt that the policies and concepts advanced by the Obama administration were a little ahead of the times. The group of voters with the largest numbers is the Millennial generation, which has strong liberal tendencies. The rights of sexual minorities (LGBT) are being recognized. Ethnic diversification is progressing, with the percentage of non-Caucasian population continuing to grow. In the midst of these social changes, the response to these changes was unexpectedly rapid under the Obama administration, including the legalization of same-sex marriages and immigration policy reforms.

These changes had the unexpected effect of creating divisions in the US society. Conservatives strongly felt that the President Obama was destroying American traditions, and that there was a danger that society was being led in the wrong direction. The white working-class voters, many of who voted for Mr. Obama in the presidential elections, felt betrayed, with an increasing sense of alienation. They could not directly feel any economic recovery, and the employment situation was not improving. President Obama seemed to be focusing on minorities, and forgetting about those who had supported him; even though they felt they were the ones supporting the country by working hard, paying taxes and volunteering for the military.

Donald Trump was one of the first to grasp this anxiety and dissatisfaction, and clearly voice complaints about the changes being promoted by the Obama administration. His success in the 2016 presidential election was probably due to his image as someone who would eliminate the anxieties and dissatisfaction, with his slogan of “Let’s Make America Great Again.”

President Trump is actually focused on negating the results of the Obama administration. The actions of the Trump administration so far, including withdrawal from the Trans-Pacific Strategic Economic Partnership Agreement (TPP), announcing US withdrawal from the Paris Agreement, and renegotiation of the North American Free Trade Agreement (NAFTA), as well as most of the future priorities are all measures to controvert the previous administration.

In early August, I attended a rally of Trump supporters held in West Virginia. Hearing President Trump’s speech touting the above policies in a region where his supporters live filled me with a sense of futility. The meeting was held in a rather deserted town filled with empty stores and rows of dilapidated buildings. Until the 1970s, the area had steel mills and was prosperous, but, it had been declining for the half century since that time. How did he expect to revive the manufacturing industry? Surely, no one believed that the measures propounded by President Trump, like stronger restrictions on immigration, and giving priority to companies who produce in the US while curbing China and Mexico, would be effective in attracting manufacturers here. Nevertheless, the audience cheered President Trump as he claimed that employment was returning to the area. He is still a symbol of hope to the people who have long been ignored by politicians, telling them “We will make sure you are never forgotten again.” President Trump is plagued by a low approval rate, and struggling to manage his administration, but it seems that his base of support continues to remain solid.

US in a Transition Period - Looking for a Way Forward

In this way, the switch of power to President Trump can be regarded as an indication that the US is in a period of transition, and is still searching for a way to move forward. The plan of the Trump administration to simply deny change and refute Mr. Obama can hardly be considered an appropriate solution. The divisions that grew under the Obama administration will not be eliminated under the Trump regime. The Democratic Party has not yet found a direction to follow after the Trump administration either. Change will continue, including the aging of society, increases in the non-white population, the increasing presence of the Millennial generation, and a decline in US military and economic presence globally. Unfortunately, it appears that the aimless wandering of the US will continue for some time. However, I do not think that there will be another country to take over the leadership of the US worldwide, even in the very long-term. It is likely that the world, including Japan, will also flounder until the US finds a suitable path.

Nevertheless, the US has a history of finding and implementing appropriate ways to navigate change through thought and discussion. It is too early to say that this dynamism has been lost, so we must see what changes occur during this transition period. For the Marubeni Group it is crucial to continue to detect and follow the signs of such changes in Washington D.C., at the frontline of US politics. This important role is entrusted to the Washington Office, which is under the leadership of General Manager Yoichi Mineo from October this year. I end the final column of my eight-year term with great expectations that the good fight will continue.

Finally, I would like to express my sincere appreciation to the readers who have been following this column over the years. I am sure you will continue to enjoy the column from General Manager Mineo starting in the next issue.