Introduction

As we have shown in previous chapters, both Clinton and Bush faced challenges of a quite different character: in Clinton's case these arose out of victory in the Cold War and in Bush's out of a devastating attack on the American homeland. Barack Obama's stunning electoral victory in 2008 came at yet another critical point in the post-Cold War history of the United States. Already five years into a costly and increasingly unpopular war of choice in the Middle East, the US was suddenly confronted with something it neither chose nor expected: a financial crash that quickly morphed into something far more threatening. Born out of a combination of economic hubris, cheap money, an overheated housing market and a lack of proper oversight by the rating agencies, all embedded into a complex financial system which the economics establishment had predicted would never fail, the situation confronting Obama when he assumed office was, in the words of one economic notable, probably as bad, if not ‘actually worse’ than that which had faced the United States back in the early 1930s. Clearly, this was no mere blip but a profound crisis of the whole system, which was to bring Wall Street to its knees by the end of 2008 before going on to cause the worst global downturn since the end of the Second World War.

Moreover, what happened did not just have economic consequences. At home it changed the course of the election while internationally dealing a major body-blow to the oft-repeated claim that the American model of capitalism represented the wave of the future. As Roger Altman, a former Clinton official, observed in a much-cited piece published in Foreign Affairs just as Obama was settling into the White House, ‘the financial and economic crash of 2008 […] the worst in over 75 years’, represented a ‘major geopolitical setback’ for the liberal world order as a whole, one which would not only have a material impact on people's everyday lives but would also have major international repercussions as well by ‘accelerating trends’ that were already ‘shifting the world's center of gravity away’ from the United States and the West towards other rising powers in the world, China most obviously.