Hoover's Ghost Stalks Brown, Merkel, Aso, Harper Amid Meltdown
By James G. Neuger
Oct. 13 (Bloomberg) -- The ghost of Herbert Hoover, the U.S. president toppled by the Great Depression, is stalking a generation of world leaders battling to save their economies, as well as their own political skins, from the global financial crisis.
While George W. Bush, no longer running for office, has only history's verdict to worry about, others aren't so lucky. Canada's Stephen Harper and New Zealand's Helen Clark, both facing voters now, have fallen in polls; Japan's Taro Aso may be about to call elections too.
Meanwhile, Germany's Angela Merkel is trying to engineer a solution with coalition partners who will be her election opponents next year. And Britain's Gordon Brown may find the bounce in the polls his bank-rescue plan won him hard to sustain until elections as much as 21 months off.
``You have to do something,'' says Jenilee Guebert, senior researcher for the University of Toronto's G-8 Research Group. ``Everybody, regardless of ideology, is going to acknowledge that. And if they don't, it's political suicide.''
The politicians are struggling to show leadership during what the International Monetary Fund on Oct. 8 called a ``major downturn.'' Most of their stock indexes fell 20 percent or more last week before some rebounded today, and credit remains largely frozen, putting banks worldwide on shaky footing. The IMF is now predicting 2009 economic growth of just 0.5 percent, down from 1.5 percent this year.
The economic quagmire of the late 1920s offers little solace for leaders scrambling to avoid a one-way trip to the political equivalent of Hooverville, the nickname for shantytowns that dotted the U.S. in the Great Depression. Crisis-management skills count with voters, but timing matters more.
Hoover, inaugurated in March 1929 in an epoch of affluence, got good initial grades for his response to that October's stock-market crash. He implored industry leaders to maintain wage rates, pushed Congress for more public-works spending and coaxed the Federal Reserve to loosen credit, says William Leuchtenburg, co-author of a book on the 31st president to be published in January.
``There was some feeling of rallying around the only leader one had,'' says Leuchtenburg, a retired history professor at the University of North Carolina at Chapel Hill. ``But by the midterm elections of 1930, where the Republicans lost numbers of seats, Hoover had become increasingly unpopular. In his last two years in office, it's not too much to say that he became a pariah.''
As the U.K.'s Brown may discover, the danger is greater the longer a leader has been in the public eye. The prime minister, 57, spent a decade as chancellor of the Exchequer, in charge of Britain's economy and finances. He took over as prime minister from Tony Blair, his longtime patron and sometime rival, last year.
After months of bad political news, Brown's Labour Party enjoyed a rebound after his Oct. 8 announcement of plans to spend 50 billion pounds ($85 billion) or more to partly nationalize at least eight British banks. The party had 33 percent in a YouGov poll published yesterday in the Sunday Times, its highest since January. The opposition Conservatives remained ahead with 43 percent, a drop of three points; the Liberal Democrats had 14 percent.
But Labour's uptick may fade long before the middle of 2010, the deadline for the next U.K. election, analysts say.
``The situation won't play to Gordon Brown's strengths for long,'' says Anthony Wells, a polling analyst for London-based YouGov Plc. ``Regardless of how much of it is actually his fault, this is going to happen on Gordon Brown's watch, and some of the blame will attach to him.''
Canada's Harper, bidding for re-election as prime minister tomorrow after two years in office, may have gotten the timing right -- just. The prime minister went into the campaign promising to be a steady hand amid economic uncertainty. That worked for a while -- until Liberal Party challenger Stephane Dion started chipping away at Harper's lead by accusing him of not responding to the meltdown aggressively enough.
Then on Oct. 10, Harper, 49, rolled out a C$25 billion ($21 billion) package to buy mortgages from Canadian banks to unclog the lending business.
Coupled with the biggest one-month jump in Canadian payrolls in at least three decades and a flubbed English- language television interview by French-speaking Dion, the belated bank initiative may keep Harper in office. But his hopes of ending parliamentary gridlock by winning an outright majority have faded.
Forced to Act
``The prime minister had to act, had to be seen as acting,'' says Kathy Brock, a political science professor at Queen's University in Toronto. ``Now that we have seen the crisis deepen, I think we'll see more things roll out.''
Harper's Conservative Party held at 33 percent in an Oct. 10 survey by Ottawa-based Nanos Research. Dion's Liberals, who had narrowed the gap to 3 points on Oct. 7, slipped 2 points to 27 percent.
Ideology matters less than incumbency in global politics. Nowhere have the standard political allegiances come more unhinged than in the U.S.
President Bush, 62, cast his free-marketeering instincts to the winds in pushing a $700 billion rescue for U.S. banks, an act of unprecedented intervention. Nuances aside, both candidates to succeed him, Republican John McCain and Democrat Barack Obama, voted for it.
Paying the Price
In the second presidential debate, the traditionally Democratic invocation of Republican Hoover as the bogeyman of failed economic policies came from McCain, 72. That hasn't prevented the self-described maverick from paying a steep political price for the meltdown that occurred under fellow Republican Bush: The Gallup Poll's latest daily tracking survey, of 2,773 voters Oct. 8-10, had Obama ahead, 51 percent to 42 percent.
The ideological contours are no less blurry in Europe. Brown gained fame for his role in divorcing the Labour Party from a history of meddling in the economy and favoritism for unions. Yet he already has seized two banks and will spend taxpayer pounds to buy stakes in more.
Bank rescues in the Netherlands, Belgium and Luxembourg were orchestrated by broad coalitions. And President Nicolas Sarkozy of France, who beat a Socialist candidate last year in perhaps Europe's most interventionist country, has left no doubt that if there is a French domestic bank to bail out, he will put up taxpayer money.
Marriage of Convenience
In Germany, the two ruling parties -- forced into a marriage of convenience by the inconclusive results of the 2005 vote -- are already lobbing the opening salvos in an election slated for September 2009.
Under increasing pressure for a U.K.-style swoop on troubled banks, Chancellor Merkel, 54, a nominally pro-market Christian Democrat, has to contemplate doing a rescue deal with her more statist ``grand coalition'' partners, the Social Democrats, at the same time she must campaign against them.
``Merkel's ability to lead in a crisis has never really been tested,'' says Hans-Juergen Hoffmann, managing director of Berlin-based polling company Psephos. ``She has to show she's not a fair-weather leader; it may cost her the election if she fails.''
Merkel's party tallied 33 percent in a Forsa poll published Oct. 8, below its score in the last election. The Social Democrats are faring worse, at 27 percent. Germany's dilemma is that evaporating support for the two major parties may lash them into another coalition after the next election, since the parliamentary math may not work out otherwise.
In New Zealand, where elections will be held Nov. 8, Prime Minister Clark's Labour Party trails challenger John Key's National Party as the country's budget deficit widens and its economy contracts. Key, who was Merrill Lynch & Co.'s European head of global foreign exchange before entering politics in 2002, is promising tax cuts to spur the economy. His party led 52 percent to 33 percent in a Colmar Brunton poll released last week.
The numbers game looks equally dicey in Japan, where newly minted Prime Minister Aso's Liberal Democratic Party is struggling to keep its half-century grip on power. Aso, 68, was hoisted into office on Sept. 24, the second prime ministerial switch engineered by the once-unbeatable party in 12 months.
Under the cloud of the credit crunch and the resignation of a blunder-prone cabinet minister, Aso's approval rating declined to 41 percent from 48 percent in an Asahi newspaper survey published Oct. 6. The opposition Democratic Party of Japan, which gained control of upper house of parliament in July 2007, leads Aso's party by 34 percent to 33 percent.
For now, Aso's strategy is to play for time and delay calling an election for as long as possible. Striking a statesmanlike pose, he said on Oct. 2 that sorting out the economy takes priority over electioneering.
Aso's party ``controls when they have an election, and if they felt the moment was favorable, they would do it right away,'' says Steven Vogel, a politics professor at the University of California-Berkeley. Financial upheaval and submerging popularity ``might provide good cover for a delay.''
For Related News: Global elections: NI VOTE <GO> U.S. presidential election: ELECT <GO> Credit crisis news: NI CRUNCH <GO>Last Updated: October 12, 2008 19:00 EDT
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