Beware the Chicago boys

Obama's vow of love for free markets gives reason to fear a replay of Bill Clinton's 1993 U-turn

Naomi Klein

Barack Obama waited just three days after Hillary Clinton pulled out of the race to declare, on CNBC: "Look. I am a pro-growth, free-market guy. I love the market." Demonstrating that this is no mere spring fling, he has appointed the 37-year-old Jason Furman, one of Wal-Mart's most prominent defenders, to head his economic team. On the campaign trail, Obama blasted Clinton for sitting on the Wal-Mart board and pledged: "I won't shop there." For Furman, however, Wal-Mart's critics are the real threat: the "efforts to get Wal-Mart to raise its wages and benefits" are creating "collateral damage" that is "way too enormous and damaging to working people and the economy ... for me to sit by idly and sing Kum Ba Ya in the interests of progressive harmony".

Obama's love of markets and his desire for "change" are not inherently incompatible. "The market has gotten out of balance," he says, and it most certainly has. Many trace this profound imbalance to the ideas of Milton Friedman, who launched a counter-revolution against the New Deal from his perch at the University of Chicago. And here there are more problems, because Obama - who taught law at Chicago for a decade - is embedded in the mindset known as the Chicago School.

Obama chose as his chief economic adviser Austan Goolsbee, a University of Chicago economist on the left side of a spectrum that stops at the centre-right. Goolsbee, unlike his Friedmanite colleagues, sees inequality as a problem. His primary solution, however, is more education - a line you can also get from Alan Greenspan. Goolsbee has been eager to link Obama to the Chicago School. "The guy's got a healthy respect for markets," he told Chicago magazine. "It's in the ethos of the [University of Chicago], which is something different from saying he is laissez faire."

Another of Obama's Chicago fans is the 39-year-old billionaire Kenneth Griffin, the CEO of the hedge fund Citadel. Griffin, who gave the maximum allowable donation to Obama, is a poster boy for an unbalanced economy. He got married at Versailles, and is one of the staunchest opponents of closing the hedge-fund tax loophole.

While Obama talks about toughening trade rules with China, Griffin has been bending the few barriers that do exist. Despite sanctions prohibiting the sale of police equipment, Citadel has been pouring money into controversial China-based security companies that are putting the local population under unprecedented levels of surveillance.

Now is the time to worry about Obama's Chicago Boys and their commitment to fending off regulation. It was in the two-and-a-half months between winning the 1992 election and being sworn into office in 1993 that Bill Clinton did a U-turn on the economy. He had promised to revise the North American Free Trade Agreement, adding labour and environmental provisions - but two weeks before his inauguration, the then Goldman Sachs chief, Robert Rubin, convinced him of the urgency of embracing liberalisation.

Furman, a Rubin disciple, was chosen to head the Brookings Institution's Hamilton Project, the thinktank Rubin helped found to argue for the free trade agenda. Add to that Goolsbee's February meeting with Canadian officials, who got the impression that they should not take Obama's anti-Nafta campaigning seriously, and there is every reason for concern about a replay of 1993.

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