If, from the head start of jubilant public support he can accomplish these two missions, he will be the great president which the majority of voters elected him to be. If not, the lesser status of those who try but fail, and even failure itself will replace the crown of glory with a crown of thorns.

The question, therefore, that begs an answer is what chance Obama has in dealing with the conditions of this crisis, the worst in four decades since the Great Depression of the 1930s? He would do well to study the approach, the thinking, the policies and the experiences of President Franklin Roosevelt, one of the greatest presidents of the United States.

Although Roosevelt created landmark legislation in agricultural reform to restore the barren landscape to productivity, a public works Conservation Corp to put young people to work in building infrastructure; a minimum-wage act to protect workers from exploitation, unemployment insurance, and legislation to strengthen government control over business, these collectively restored hope and some prosperity, but they could not restore the US economy to pre-depression levels.

The private-sector investment to rebuild capacities so that new production would put America back to work was tentative and inadequate. It took involvement of the US in World War II to ignite the economy in the most massive production thrust the world has ever seen to restore it to the pre-depression level, and better.

The hole in which the American economy now finds itself in this period of global crisis is not as deep by any means as that of the Great Depression when unemployment exceeded 26 per cent and 90 per cent of the value of assets on the stock market was wiped out. But the crisis of today does present an unforeseen and unrecognised problem which could be as intractable as the conditions of the 1930s.

Irreproachable commitment

President Obama expects to summon charismatically the people by a call to action to drive their energy with a conviction that 'Yes, we can!' and inspire them to replace hopelessness with hope. All this could be more than a dream. Men have, with nothing more than the power of oratory, or the strength of virtuous conduct, transformed countries to accept new missions of national life.

Gandhi, as a singular symbol for a new and independent India became the paramount force of change by his irreproachable commitment to non-violence. So did Nelson Mandela, who suffered 27 years imprisonment in defiance of apartheid. Martin Luther King Jr was mid-way in a massive assault on the abuse of civil rights when he was assassinated. Marcus Garvey, before all of these heroic figures, had mobilised three million followers across several countries in a powerful crusade for racial equality.

Can Obama be that heroic figure today to build a socially just society and to return America to its economic paramountcy, on a timely basis? The answer lies in the problem which created the global crisis.

The surplus savings of Far-Eastern and other rapidly expanding economies, particularly the BRIC countries (Brazil, Russia, India and China), have to be invested to earn returns. The choice investments are US Treasury bonds, which are prime gilt-edged securities. China alone holds US$700 billion. The overload of savings for investment has created a need for new and different investment vehicles to cope with the flow.

Bad debt

Hence, a new mechanism was devised: under-secured or unsecured sub-prime mortgages mixed with securitised mortgages and sold in packages to banks and other financial institutions across the globe. The dramatic increase in oil prices made it impossible for holders of sub-prime mortgages to service their debt. Hundreds of billions of dollars of bad debt were created overnight which resulted in the mortgage based investment packages becoming worthless paper. A global crash followed. Many investment institutions, banks and insurance companies collapsed. The prized motor-vehicle industry is facing failure. The stock market plunged and is expected to lose 50 per cent of its asset value by the end of the crisis.

Washington responded with the most massive financial bailout in history at a cost of some 60 per cent of the gross domestic product (GDP) of the US. Still, the problem remains intractable. This is so and will continue to be so creating a climate of very slow recovery as in the Great Depression, because the root cause of the problem is cultural not economic.

Using China as the prime producer of the surge in savings, it cannot be expected that a highly successful producer will voluntarily reduce production and growth of savings. But the American economy has to accommodate these savings because it relies on the inflows of those countries to finance its own consumption expenditure which forms nearly 70 per cent of its GDP. It cannot do without the inflow of savings from other countries to sustain its eco-nomy. Herein lies the problem, reliance on the need for the very cause of the problem.

Development

To break this vicious circle, the new president of the US will have to urge greater American export production to earn more in order to borrow less so that there is less reliance on the savings of other countries to finance Americans' needs. Americans must also spend less and save more, with the surplus savings used to finance infrastructure development, not more consumer expenditure.

To reduce the productivity of countries with a strong work ethic, is a cultural dilemma. To reduce the level of consumer expenditure in a country steeped in consumerism, is a cultural dilemma. To reduce high wages to ensure export competitiveness in a country built on the high take-home pay required to support high-level consumption, is a cultural dilemma.

Restructuring cultural characteristics is an awesome task requiring firm commitments to a common good and deep cooperation. President Obama has his work cut out for him if he goes this route. Progress will be slow and could be overtaken by public frustration or electoral timetables.

But there is another solution: allow the value of the US dollar to depreciate significantly until the cost of American exports is competitive and export earnings surge. Cheap imports from the highly productive countries will then become more expensive and purchases reduced to fit within what the American economy can afford.

With the world watching to see if remarkable results, as hoped, will be achieved, President Obama should set his course on the quick fix of economic adjustment, while using his strength of persuasion to achieve the result of more lasting cultural transformation. For the sake of stability and a restoration of prosperity, let us hope he make the right choice.