Bill Clinton’s presidency was a golden era of economic growth thanks to the luck of circumstances beyond his control
The Obama campaign will be hoping to capture a bit of political magic when Bill Clinton makes his keynote speech to the Democratic national convention in Charlotte. Clinton can evoke an era of prosperity that seems like a distant dream in today’s bedraggled economy.
Apart from his powerful abilities as a speaker and advocate for the independent voters the Obama team need to win over, as president Clinton presided over eight years of strong economic growth, alongside falling unemployment, 21 million jobs added and an almost miraculous bull market in stocks and house prices. US manufacturing staged a recovery. Personal incomes rose dramatically. For those reasons his time in the White House is remembered with a rosy glow, rather than for his affair with an intern and his subsequent legal contortions.
It’s worth remembering, though, when Clinton takes the stage at the DNC in Charlotte, that he was also extraordinarily lucky – and lucky in a way that Barack Obama has not been.
Clinton’s 1992 election victory itself was rather lucky, a combination of a retrospectively mild economic downturn, an uninspiring incumbent, GOP voter fatigue and – perhaps more than anything else – the insurgent third party candidacy of Ross Perot. Having said that, Clinton also made his own luck on the campaign trail, especially in the Democratic primaries when he was dogged by evidence of extramarital affairs.
Once in office he benefited from a golden business cycle and the rising economic tide it brought with it. That buoyancy enabled him to strike deals on raising taxes and reforming welfare without suffering the fallout that usually attends. Economic growth spurred years of bumper tax receipts, allowing the federal government to turn back time and pay off its debts. And the Federal Reserve under Alan Greenspan nodded its approval with long periods of generous monetary policy.
He also was lucky in another respect: the fall of the Berlin Wall in 1989 and collapse of the Warsaw Pact ushered in a peace dividend unheard of the end of the Vietnam war, enabling the US to trim its enormous military budget. His predecessor George HW Bush had vanquished Saddam Hussain in the first Gulf War, so that even the Middle East was relatively quiescent for most of Clinton’s reign. Oil prices fell and remained low.
Domestically, he benefitted from demographic good fortune. A baby boomer himself, Clinton’s time in office saw his generation enjoy their years of maximum earning potential. In 1996 – the middle of Clinton’s time in office – the eldest of the baby boom generation hit 50 years old while the youngest were 32. By 2012, that aging demographic bulge is reaching retirement age of 65.
Meanwhile, the emerging economies of Asia were entering the global marketplace. China’s economic reforms were resulting in cheaper imports and new markets for the US, but before the spurt of growth that has since catapulted China into a global rival.
Then there was technology. The internet arrived and transformed computers from office equipment into domestic appliances. The dotcom boom of the later 1990s became a breathtaking global bubble, fed by Greenspan’s low interest rates and Panglossian optimism. It burst almost as spectacularly – but Bill Clinton’s luck meant that happened as his presidency ended.
Clinton’s eight years in office weren’t entirely without incident, even aside from Monica Lewinsky. He did face some difficult economic decisions. But in each case, the resilient growth and bumper surpluses of the US economy gave him leeway that Barack Obama has never been afforded.
In 1994, Mexico suffered jarring currency turmoil – nicknamed the “Tequila crisis” – the details of which need not concern us. But Clinton and his Treasury secretary Robert Rubin battled through congressional opposition to give Mexico $50bn in assistance, enough for the peso to weather the crisis. The US government even made a $500m profit on the loans, which were repaid.
In 1997 there was a far more dramatic series of events, starting with the Asian financial crisis that saw the “Asian Tigers” endure a crash of great severity, with knock-on international consequences. Russia defaulted on its debts and the collapse of the Long Term Capital Management hedge fund caused a credit crunch similar to that seen in 2008. But the underlying strength of the US economy and ever-looser monetary policy via Greenspan saw the crisis contained.
And there were wars, most notably in the former Yugoslavia, and ill-fated interventions in Somalia. But nothing on the scale of those launched after 9/11 and inherited by Obama.
Of course, luck isn’t everything. Although it would have been difficult in the circumstances, Clinton could always have made things worse through policy errors. It’s worth remembering that economic inequality rose alongside incomes, while the property boom and easy credit that many enjoyed would blow up a decade later. The Clinton-era financial deregulation would also come back to haunt America. But those consequences were well in the future when Clinton left office.
It’s also worth remembering that the golden years weren’t enough to give Clinton’s vice president Al Gore the White House in 2000 (although Florida’s voting processes and the Supreme Court probably robbed Gore of a narrow victory). But Clinton is more popular with voters now than his last months in office – and Obama will be hoping that memories of the good times rub off on his campaign tonight. But what Obama really needs is some of Clinton’s luck.
Asil Nadir’s firm conjures up memories of decade when investors wanted piece of the action without caring what the business did
Asil Nadir’s Polly Peck International was the company that captured the 1980s in all its garish, tin-plated glory. Every boom throws up a rogue’s gallery of financial villains to provide living proof of Warren Buffett’s maxim that it’s only when the tide goes out that you learn who’s been swimming naked. The 1980s was no exception.
It was the era when Peter Clowes was conning investors, when Robert Maxwell was raiding the Mirror pension fund and all sorts of skullduggery was happening at BCCI. But, despite this competitive field, it is Polly Peck – with its slightly ludicrous name, its rakish chief executive and its meteoric rise and fall – that best conjures up memories of the yuppie decade.
With perfect symmetry, Nadir took a controlling stake early in the 1980s for less than £300,000, saw it balloon in value while Wham! were at the top of the charts and England were regularly hammered by the West Indies at cricket, and fled to Northern Cyprus in 1993, accused of having had his hand in the till.
In that period, Britain had de-industrialised, deregulated and de-unionised. The economy’s centre of gravity shifted from manufacturing to finance, particularly after the big bang reforms of the City in 1986.
Financial stories moved from the business pages to the front page, but it was only really the exploits of the deal makers and the financial engineers that mattered in a get-rich-quick era.
Building a business organically or, heaven forfend, making things, was viewed as old hat. What set the financial pulse racing was the takeover, the merger, the leveraged buy-out. And those were Nadir’s specialities.
Polly Peck became the South Sea Company of the 1980s. Investors wanted a piece of the action, even though they did not know – or seem to care – what the business did.
Nadir expanded through acquisition, buying textile and electronics companies before securing the Del Monte canned fruit business from Nabisco in 1989.
This, though, was one leveraged deal too many for a business now capitalised at £1.7bn and included in the list of the UK’s biggest companies. By this time, the 1980s boom was coming to a rapid and painful end as interest rates were tightened to combat rising inflation. It was payback time for all those who had borrowed too much in the expectation that the good times would go on for ever, and Nadir was one of them.
Beyond the dotcom-era benchmarks.
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