As Barack Obama begins his tour of Europe and the Middle East this weekend, he is aiming to project back home the image of a world leader-in-waiting, a statesman-like performance to bolster his foreign policy credentials and fuzz his background as a single-term Senator who has visited Europe only once in the past 10 years.
But behind the foreign policy speeches and photo ops, there is an opportunity to catch up with some of Europe's leaders on pressing economic issues. Gordon Brown has already promised to put the credit crisis and the soaring oil and food costs at the top of their agenda.
It is the state of the economy that has shot to the top of the list of concerns for US voters too. Polls put Obama ahead on the issue at the moment, but this is a tricky time for him and his Republican rival, John McCain – candidates who, in different ways, were defined by, and won their victories because of, their positions on terrorism and the Iraq war.
Suddenly the question over Obama is: will he be a good leader for the global economy?
Both candidates are still scurrying to fill in the gaps in their policy programmes, no easy task when the economic outlook is so uncertain. What is clear, according to Edward Kerschner, chief investment strategist for Citigroup, is that an Obama presidency would be running with the tide of public opinion, which increasingly says it is time for government to do more. "Active government intervention in the economy last occurred in the late 1970s, when Jimmy Carter thought that various 'energy plans' would solve America's economic problems," he said. "Both John McCain and Barack Obama have embraced the populist concept that key components of the American economy are 'broken', so that government action is necessary to 'fix' them."
What this involves with regards to the current mortgage crisis is a big government programme to help stabilise the housing market. Wall Street has settled on the view that the credit crisis cannot end until we find a bottom for house prices, from which it will be possible to value the myriad derivatives that use houses as their ultimate collateral. Obama is proposing a $10bn (£5bn) "foreclosure fund" to help borrowers to refinance mortgages with which they are struggling, and other initiatives. Some variation of these schemes seems likely whoever wins the White House, and Obama seems more likely to buttress them with additional regulation of the finance industry aimed at protecting consumers. What is yet to be sketched is the future role of Fannie Mae and Freddie Mac, the mortgage finance companies whose backing by the federal government has kept mortgage rates low for average Americans. Obama has put them at the heart of his recovery plan; their near-implosion last weekend has raised Wall Street calls for their role to be replaced by a free-market solution, something more in tune with the Republicans' Congressional agenda.
Beyond the immediate financial crisis, where policy pronouncements today may not – frankly – much resemble the compromises that are eventually hammered together, the philosophical outlines of an Obama economic policy are pretty clear.
His programme is closer than that of any Democrat candidate for a generation to a traditional tax-and-spend liberal agenda. At home there will be more regulation and raids on corporate villains such as the oil and gas industry and private equity. Moves towards universally available health insurance can be expected to hit Big Pharma. Taxes will be raised for the most well-off to help fund cuts for those on lower incomes and to help stave off the bankruptcy of the social security system. Most controversially, taxes on dividends and capital gains will rise, too, which the business lobby is expected to campaign strongly against in the run-up to November, saying now is the wrong time in the business cycle to raise taxes on investment.
Neither candidate looks likely to balance the budget without swingeing cuts in government spending, according to the non-partisan Tax Policy Center, something that only McCain has shown enthusiasm for. "Although both candidates have at times stressed fiscal responsibility, their specific non-health tax proposals would reduce tax revenues by $3.6trn [McCain] and $2.7trn [Obama] over the next 10 years," a recent analysis by the centre said.
Abroad, an Obama presidency promises growing protectionism. He has promised big subsidies for domestic ethanol production and opposes new free-trade deals. And most significantly, he has demanded a renegotiation of the North American Free Trade Agreement signed by Bill Clinton – an agreement that has become a Democrat and union bogeyman as the backlash against globalisation has intensified.
Economists liked what they saw from Obama during the last days of the primary campaign, when he resisted a plan to suspend taxes on petrol to help ease the burden of high oil prices. That would do nothing except blow a hole in the government's finances, he said, and promised instead to subsidise alternative fuels that would reduce the US dependence on oil.
Those same economists hope that President Obama will resist many of the protectionist stances struck by Candidate Obama – and to that end, they reassure themselves by looking at the advisers he has assembled. Those advisers are a wonkish set whose publications suggest they tack centrish rather than left in their economic views. One, Austan Goolsbee, even suggested earlier this year that Obama's desire to renegotiate Nafta was not as dramatic as has been portrayed.
He got slapped down by Obama's campaign staff, of course. Obama is still only a candidate.
The University of Chicago economist, who is an expert on tax policy and the role of technology in the economy, has been close to Obama for four years. After he met Canadian officials, the embassy wrote an internal memo questioning Obama's commitment to renegotiating the Nafta trade agreement, to add new protections for US jobs. According to the officials, anything said on the campaign trail "should be viewed as more about political positioning than a clear articulation of policy plans". Mr Goolsbee denied saying any such thing.
Hired as a top campaign staff aide on economic policy shortly after Obama clinched the Democratic nomination, Furman is a close associate of the former Treasury Secretary Robert Rubin. Furman's reputation as a backer of free trade has concerned some of Obama's union supporters.
A professor at Georgetown University Law school, Tarullo is an expert on trade and international economics and was a senior White House aide to Bill Clinton. He served as a "sherpa" to meetings of the Group of Eight industrialised economy meetings. Last month, Tarullo said Obama supports free trade but "he's not for trade policies that don't protect American workers."
Before Ben Bernanke, and before Alan Greenspan, Paul Volcker was chairman of the Federal Reserve, earning a formidable reputation during the 1980s for having broken the back of the double-digit inflation that marked the early part of the decade. He endorsed Obama early, in January, and made himself available as an informal adviser.
Another veteran of the Clinton administration, Tyson is the former chairwoman of the president's Council of Economic Advisers. She was the first female dean of the London Business School between 2002 and 2006, and is a professor at the University of California, Berkeley. Only recently tapped as an adviser to Obama, she brings Wall Street experience as a director of Morgan Stanley.Reuse content