Chief executive or business-basher?

By John Gapper

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Ingram Pinn illustration

To US companies and business leaders, Barack Obama remains, despite the scrutiny to which he was subjected during his long slog to this week’s triumph, an enigma.

Who is the new president? Is he the crisp non-ideological technocrat who ran a flawless campaign as surely as an up-and-coming star at General Electric or another big US multinational? The man with whom many chief executives instinctively feel they could do business?

Or is he the community organiser from Chicago with tight links to unions, who railed against corporate profits in his campaign and vowed to alter the North American Free Trade Agreement? The left-winger who wants to raise taxes on the wealthy and puts equality above efficiency?

John McCain, Mr Obama’s Republican opponent, tried unsuccessfully to paint Mr Obama as a dangerous radical who associated with Bill Ayres, the former Weather Underground member. The rabid elements of the Republican base accused him of being a closet Muslim who despised his country.

Those attacks failed because Mr Obama is not an Islamic terrorist and neither looks nor acts like one. But the fears of some business leaders that Mr Obama will harm their interests are plausible.

As in other matters, Mr Obama’s reassuring quality in his attitude to business and enterprise is his engaging personality.

To read some parts of his speeches, you would believe he was a populist business-basher, as John Edwards, one of his challengers in the Democratic primaries, styled himself. Yet Mr Obama himself, with his studied calm and tolerance for opposing views, projects a pragmatic air.

In this, he bears a similarity to Tony Blair, a centre-left prime minister who convinced many British business leaders that he was not wedded to left-wing ideology, although he believed in social justice.

Mr Obama has surrounded himself with advisers such as Austan Goolsbee, a University of Chicago economist who is interested in altering incentives rather than old-style redistribution. Mr Obama has also tempered his robust criticisms of Wall Street misbehaviour by emphasising that it hurts confidence in business and free markets.

Looked at from this angle, you could believe that Mr Obama is really a free enterprise enthusiast who simply thinks that rules and regulations need to be adjusted a little. He talked about aggressively enforcing labour standards in trade agreements but perhaps that was campaign rhetoric.

To add to the sense of comfort, Mr Obama’s response to the financial crisis reassured business people because it suggested that an Obama administration would prize stability above knee-jerk reactions. After a period of incredible volatility, a little calm could go a long way.

The flaw in this sanguine point of view is that Mr Obama has little history of heavy lifting against labour unions or left-wing positions within the Democratic party. On touchstone labour issues such as making it easier for unions to get recognition without a secret ballot, he has toed the line.

This contrasts with Mr Blair, who returned Labour to electoral success by, among other things, taking stands against the unions that funded the party on issues including secret ballots and Labour’s commitment to nationalisation.

Mr Obama, accused of touting “socialist” tax policies by Mr McCain, has been given cover by George W. Bush’s $700bn bail-out. “We are all a bit socialist now. The question is how far we are going to extract ourselves,” says John Castellani, president of the Business Roundtable, which represents chief executives of big US companies.

Mr Obama is unlikely to be in a hurry, given the new Democratic majority in both houses of Congress. Democratic leaders are already flexing their muscles on financial regulation and one of his first tasks will be to choose the new Treasury secretary to implement reform.

Apart from regulation, the two big areas for concern about Democratic over-reach in business matters are taxes and trade.

Mr Obama’s tax plan is not socialist; it is a shift away from the Republican emphasis on lower taxes on income, capital gains and corporations in favour of fairly standard progressive taxation. The president-elect will raise rates on high earners, including many owners of unincorporated businesses.

But that marks a change from the past eight years. “Mr Obama’s plan has a redistributive bent. Most tax cuts provide incentives for growth, which is not his main goal,” says Alan Viard, a resident scholar at the American Enterprise Institute, the right-wing think-tank.

Mr Obama’s stance on trade and globalisation provide even more cause for concern. He has pushed the idea of renegotiating trade agreements to raise labour standards, by implication making it more expensive for US companies to outsource jobs.

In practice, it might not have made a difference if Mr McCain had won the election because, although he was braver on trade, Congress would have blocked him. “He could not have got a trade deal with New Jersey through Washington,” says Mr Castellani.

For all that, Mr Obama’s campaign does not suggest much sympathy for big corporations, which have been lonely symbols of US prestige in recent years. He pounded them on tax avoidance, advised them to invest at home rather than overseas, and lambasted oil company profits.

The president-elect looks and talks like a brilliant chief executive. But is that the real Barack Obama or is the fine print of his policies a better guide? I cannot help suspecting the latter.

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