Barack Obama is Inaugurated, Gaza’s Operation Cast Lead Ends After 22 Days, the G20 Pledges $1.1 Trillion Against the Financial Crisis and Madoff Pleads Guilty

Jamaica Homes Global Conflict & Caribbean Impact Review | Published 3 April 2009 | Reporting Period: 3 January – 2 April 2009

Quarterly Briefing

• Barack Obama is inaugurated as the 44th President of the United States on January 20; an estimated 1.8 million people gather on the National Mall; he signs an executive order to close the Guantanamo Bay detention facility on January 22 and immediately dispatches his special envoy, George Mitchell, to the Middle East.
• Israel’s Operation Cast Lead in Gaza, which began December 27, ends with a unilateral Israeli ceasefire on January 18; the operation killed approximately 1,400 Palestinians, of whom roughly a third were civilians; thirteen Israelis died; Gaza’s infrastructure — hospitals, water systems, roads — was extensively damaged; the blockade continues and reconstruction has not begun.
• The G20 London Summit on April 2 agrees a $1.1 trillion package of support for the global economy, including $750 billion for the IMF, $250 billion in Special Drawing Rights and enhanced trade finance; it is the largest coordinated multilateral economic response in history; the summit marks the formal elevation of the G20 as the premier forum for international economic governance.
• President Obama signs the American Recovery and Reinvestment Act on February 17, authorising $787 billion in tax cuts and government spending to counter the recession; it is the largest single economic stimulus in US history; its passage without a single Republican House vote illustrates the partisan polarisation shaping the US response to the crisis.
• Bernard Madoff pleads guilty on March 12 to eleven federal felony counts related to operating a Ponzi scheme estimated at $64.8 billion, the largest financial fraud in history; the case illuminated the failures of financial regulation that accompanied the crisis and destroyed the savings of thousands of individual investors and institutions globally.
• Pakistan’s Lahore undergoes a devastating terrorist attack on March 3 when gunmen ambush the Sri Lanka national cricket team bus, killing eight people and wounding six players; the attack demonstrates the reach of militant networks into Pakistan’s major cities and deepens concerns about the Pakistani state’s capacity to guarantee public security.

Prologue: A New Presidency Inherits a World in Crisis

Barack Obama’s inauguration on January 20 represented the most significant American political transition since at least Reagan in 1981. He inherited two active wars, the worst financial crisis since the Great Depression, and a global standing that had been diminished by eight years of unilateralism and the failures of the Iraq occupation. The hopes invested in his presidency — by Americans and, notably, by international publics who had watched the United States with increasing anxiety — were historically exceptional; whether he could meet them was another question. For the Caribbean, the transition carried particular significance: a president with African heritage, a stated commitment to multilateralism and an expressed willingness to engage diplomatically with states whose governments the US found uncongenial was a different proposition from his predecessor. Obama’s early signals on Guantanamo, the Middle East and engagement with adversaries were encouraging; whether they would translate into a substantively different hemispheric policy remained to be seen.

Gaza: Operation Cast Lead and Its Consequences

Operation Cast Lead had begun on December 27, days before our reporting period; the vast majority of its conduct and almost all of its casualties fall within this quarter. Israel’s stated objectives were to stop Hamas rocket fire into southern Israel and to destroy Hamas’s military infrastructure; it achieved the first objective temporarily and the second partially. The operation involved an air campaign and a ground invasion; urban warfare in a densely populated territory of 1.5 million people produced inevitable civilian casualties at a scale that drew global condemnation. South Africa, Venezuela and several Caribbean states issued sharp statements; the UN Human Rights Council established a fact-finding mission. Gaza’s hospitals, already under-resourced, were overwhelmed. The post-conflict political question — who would govern Gaza and on what terms — was left without an answer.

For the Caribbean, the Gaza conflict’s most significant dimension was diplomatic and economic. Oil price volatility in the Middle East had direct consequences for Caribbean energy costs; the region’s dependence on Venezuela’s Petrocaribe fuel subsidy scheme gave Caracas’s fierce denunciation of Israel an additional resonance for countries receiving heavily discounted Venezuelan oil. Jamaica, balancing its relationship with the United States and with Venezuela, navigated carefully; the conflict illustrated the extent to which the Middle East’s crises remained inescapable Caribbean concerns.

The G20, the Recession and Caribbean Exposure

The London G20 summit, meeting as this edition is published, committed to a $1.1 trillion support package that was larger than most analysts had anticipated. The IMF would receive a tripling of its resources to $750 billion; a new $250 billion allocation of Special Drawing Rights would provide liquidity to developing country central banks; trade finance would be expanded. For smaller economies dependent on trade and external capital, these commitments — however imperfectly they might be translated into actual available resources — were significant. Jamaica’s own discussions with the IMF for a standby arrangement were ongoing; access to an enlarged IMF was a genuine support for the government’s fiscal management options.

The recession’s Caribbean dimension was multifaceted. Tourism arrivals in the January-March period were substantially below 2008 levels; the hotel and hospitality sector was laying off staff. Remittances from the United States — still the primary source of foreign exchange for many Jamaican households — were declining with US unemployment. Commodity prices, which had briefly recovered from their 2008 collapse, were falling again. The multilateral commitments made at the London G20 were, at this distance from Kingston or Bridgetown, more abstract than immediate; the real question was whether US and European consumer spending would recover quickly enough to restore the tourist arrivals and remittance flows that the Caribbean’s social fabric depended on.

Looking Ahead

Obama’s decision to order the closure of Guantanamo Bay faces congressional resistance that is already apparent; whether the facility actually closes within his stated one-year timeline is in serious doubt. Gaza’s humanitarian situation will worsen without reconstruction funding that requires the blockade’s easing; neither Israel nor Hamas has incentive to make concessions that would make that possible. Pakistan’s security situation — illustrated by the Lahore cricket attack — is deteriorating in ways that have direct implications for the Afghan war that Washington intends to intensify. And the Caribbean enters its main tourist season at the lowest visitor confidence level in years, with the region’s economic recovery contingent on external forces entirely beyond its control.

Jamaica Homes Global Conflict & Caribbean Impact Review is published quarterly, examining how wars, geopolitical tensions and major international crises have shaped Jamaica, the Caribbean and their economies.

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