With 2008 drawing to a close it seemed like a good time to look back at the year that gave America its first black president, saw stock market carnage and the war on terror drag on. Are there lessons to be learned? On 28th November at Sydney's WEA college the year was reviewed. What do you think?

THE GLOBAL FINANCIAL CRISIS

Standard Warning Regarding Financial Advice: consult your financial advisor

1. Current Economic Crisis

- banks created the crisis: (i) they lent money for assets that weren't worth the value (ii)  they created highly complex financial instruments which few people could understand (iii) salaries were heavily weighted towards bonuses and so encouraged short-term risk-taking (iv) all this was done on borrowed money

- "sub-prime": loans to poorer people, often people with a poor credit history

- if people do have a poor credit history, why expect them to be able to pay even higher repayments? ("NINJA": No Income, No Job, No Assets)

- loss of employment is the main reason for borrowers failing to keep up with mortgage payments; 60 per cent of homeless Americans are employed

- US borrowing spree has created a high level of personal debt (with Americans using their homes, via equity loans, as ATMs)

- the crisis feed upon itself: declining confidence

- distinction between a dramatic Wall Street "crash" and the slow slide into a "recession": "death by a thousand cuts"

- is this the Depression that I have been warning about in this WEA building since the late 1970s?!

2. The Bigger Picture

- crisis began in the late 1970s/ early 1980s with "de-regulation": leaving the economy to the market; government got out of the business of governing and just went for micro-matters

- problem has been made worse by the rise of new brokers: people who just want to put a quick deal together and get out with their fee (at least the banks are in for the long haul because a mortgage could last for 25 years)

- recessions are a natural part of life: a cleansing of the economic system

3.Solutions?

- no easy answers; don't expect too much from the new US President

- crisis has reaffirmed that there is still a role for governments (and international co-operation) in regulating finance

- governments are doing better this time than in the 1930s

- need for new ideas eg why not allow homeowners the option to remain as renters for up to 20 years following a foreclosure?

THE NEW US PRESIDENT

4. Barack Obama

- election: November 4 2008, with the new President sworn in on January 20 2009

- 1st serious Black presidential candidate (eg Jesse Jackson never stood any chance): late father was a Kenyan who was born in a hut, late mother was a student from Kansas; Obama born in Hawaii; raised mainly by his maternal grandparents in Kansas

- what Barack Obama's parents did by getting married was illegal in some US states when he was born

- he did not marry into wealth and class (unlike Bill Clinton): wife is Black from a poor family; Michelle's father had MS; she is equally talented

- life story is itself an example of the American Dream: from rags to riches

- importance of education as a key to advancement - he took on the Clinton Family network and beat it

- it all began (at the national level) with July 27 2004: Democratic National Convention speech (see: Shel Leanne Say in Like Obama: The Power of Speaking with Purpose and Vision, Sydney: McGraw Hill, November 2008)

- what signal of a "new" America will go out to the world when the US gets a young, black president with Hussein as his middle name?

- bottom line: US has a tremendous capacity for self-renewal - a factor to bear in mind when people speculate on the "US's decline"

- as to "inexperience" of the candidates - the only way to get prepared for the job is to do the job [look at how the current President Bush is very different from the Governor Bush of November 2000]

5.Assessing President Bush

- Bush was invisible in the 2008 presidential campaign (he was not even wanted in person at the Republican Convention)

- Sidney Blumenthal The Strange Death of Republican America: Chronicles of a Collapsing Party: US is in for once in a generation political "realignment"

- modern Republican Party began in 1860 and Abraham Lincoln was elected as President; he took the US through its Civil War (1861-5) and he set his party on a path of political dominance

- in those days, most political and economic power was in the North - and this was firmly Republican; Northerners were proud to be associated with the "party of Lincoln"

- few white persons in the South voted Republican and so they voted Democratic; as the decades rolled by, two Democratic parties evolved: a very conservative one in the South and a more liberal one in the North; since the party was divided, it rarely obtained presidential power

- next realignment occurred in 1932 and the Great Depression: Republicans held responsible and so Franklin Roosevelt came to power with a broad-based Democratic coalition; he took the US out of the Great Depression and then into World War II victory

- Democratic Party held power on and off until 1968

- next realignment was foreshadowed by Democratic President Lyndon Johnson when he signed into law the historic 1965 Civil Rights Act: "We have now lost the South for a Generation"

- Republican presidential candidate Richard Nixon in 1968 recognized a new opportunity for his party and embarked on his "Southern Strategy'; his party was not the party of the new Civil Rights legislation

- Blumenthal argument - written months before the November election - was that the Bush-dominated Republican Party was now in deep trouble; Party has lost its stronghold in the North; President's grandfather was a Northern Senator; are now very few of them left in the North

- ironically the stronghold of the Republican Party is now in the South and the Mountain States of the Old West (but not California); it has become the rump that the Democratic Party was reduced to after the 1965 Civil Rights Act.

6. The "Zero Year" Curse

Elected          President            Cause of Death                Date of Death

1840              Harrison                Pneumonia                      April 4 1841          1860/4           Lincoln                  Assassination                 April 15 1865          1880              Garfield                 Assassination                 Sept 19 1881      1900              McKinley              Assassination                  Sept 14 1901    1920              Harding                 Stroke                             Aug 2 1923 1932/36/ 40/44            Roosevelt               Stroke                             April 12 1945     1960             Kennedy                Assassination                  Nov 22 1963

- Ronald Reagan was elected in 1980 but the assassination attempt did not take his life

- George W Bush Continues to Defy the "Zero Year" Curse

7. Implications for Australia

- Australia is a loyal ally: it is the only country to have fought alongside the US in all the US's 20th Century wars and in 2003 invasion of Iraq

- relationship is too deep for it to be affected by changes in leadership; never over-estimate the importance of personal relationships at head of government level

- US and Australia both have weak leaders/ strong states (developing countries often have strong leaders/ weak states eg Robert Mugabe and Zimbabwe)

WARS IN IRAQ AND AFGHANISTAN

8. IRAQ: SOME PROGRESS IN 2008

- troop "Surge" is showing some signs of progress

- but the 2003 operation can hardly be called a "victory" given all that has happened and the damage to US prestige around the globe (don't assume the US's sympathetic media and political treatment in Australia is the international norm)

- concern about the impact of the global financial crisis on the US's capacity to keep fighting wars

- recovery package of US$700 billion is a very large sum of money! (about the size of the US defence budget). How will the US afford the recovery package and two wars?

9.AFGHANISTAN: THE NEGLECTED CONFLICT

- conflict is going badly - both US presidential candidates agreed that Bush had not devoted enough resources to this conflict (Rudd has pulled combat troops out of Iraq but not Afghanistan)

- Osama bin Laden is still on the run

- Will President Hamid Karzai have to negotiate with the Taliban to create a coalition government in 2009?

- risk of increased conflict in Pakistan: the world's first failed nuclear state?

10.RUSSIA: THE BEAR IS ON THE PROWL AGAIN

- Russian/ Georgian August 2008 conflict was part of the "frozen conflicts" in Russia's "Near Abroad" (there are many others)

- US's European NATO partners were unhappy with having a potential member so far east and so close to Russia; they disagreed with Bush's friendly overtures to Georgia in early 2008

- the conflict is not a return to an ideological Cold War (communism is discredited in Russia)

- conflict reflects the fact that Russia wants some respect

- Russia used to be a super power and then it was neglected (1992-2000)

- Russia is exploiting Russia's energy wealth to remind the world about the Russian Bear

- Russia is also exploiting the US's getting bogged down in the Middle East; this gives Russia a freer hand elsewhere

- China may also use the US's distraction in the Middle East to continue its own military build up

- Australia may have to increase its own defence expenditure for the looming Pacific Arms Race

INFORMATION REVOLUTION

The New Era

11.A New Revolution: information is the currency of power

- since last Ice Age: farming/ agriculture

- 1750: Industrial Revolution: factories/ manufacturing

- now: information: information and communications technology

12.Impact of the Information Economy

- a fish doesn't know it swims in water - the full impact of the Information Economy may not be fully recognized by those of us living through the revolution

- just as the world fears impending global calamities, so humanity saves itself by creating a "global brain" to bring together people and ideas: the Internet

- connects more people

- dissolves national boundaries

- creates global hits (such as "Harry Potter")

- compresses time

- abolishes some jobs (dis-intermediation) and creates the need for new ones (re-intermediation)

- creates new markets

- matter doesn't matter: wealth of a company comes less from the ownership of land and    factories, and more from the ideas in the heads of staff

- from "mass society" to "de-massification": Ford's Model T was only available in black; now we can customize products to suit a person's particular tastes

- creates greater complexity: the Model T appealed to motorists because they could lift the bonnet to see why the car had stopped; lifting the bonnet today would be of little help to a motorist

- secrets are more difficult to keep: everyone is potentially an "insider"

- reputations are more quickly damaged: make a mistake in one place and its details can be sent instantly around the world (such as the two New Zealand girls who measured the vitamin C content in a well known drink)

- greater options for the consumer; an idea from someone in Lisbon or Shanghai, for example, might mean improved processes or better profitability for other customers across the world

- the revolution keeps moving: from Web 1.0 (reading) to Web 2.0 (writing)

- a new global culture has been created and more consumers than ever before: eg in China over 300m people have been lifted out of poverty in three decades

- a world of potential economic growth: people now have higher expectations: they expect to do better than their parents: they can see how others live around the world

13. New Opportunities and Challenges: Data-Mining

- Ian Ayres Super Crunchers: How Anything can be Predicted (London: John Murray, 2007): a reflection of the greatly improved technology rather than the art of statistical prediction

- Wal-Mart has a data base 28 times the size of the Library of Congress

- Orley Ashenfelter can predict the quality of good "years" for wines - well ahead of the swishing and spitting approach of the wine gurus

- Harrah's Casinos can predict when each client is reaching their own "pain point" and therefore when to intervene with an offer of a free meal (to get them away from the tables)

- making the most of new opportunities for data mining: storing, safeguarding, retrieving and analysing data

14. New Risks

• risk of Big Brother of government invasion of privacy and misuse use of personal data -

  though young people don't seem to share the concerns about privacy of older people eg risky behaviour in Web 2.0 social networking

  - risk of cyber-crime, already one of the largest forms of global crime; the Internet was not originally designed to handle this amount and type of financial/ commercial traffic

  - risk of cyber-warfare, such as Chinese hackers attacking US Government system since at least 2003

  15. Bottom Line

  - (trying to be optimistic!): just as there is a growing despair over the future of the world, humankind creates a "global brain" (Internet) to share information and ideas: resources like oil etc may be limited by human intelligence is not

  - we need to be careful that in our concentration on immediate economic and political issues, we do not lose sight of the wider long-term technological issues