How imbalances led to credit crunch and inflation
By Martin Wolf
Inflation is always and everywhere a monetary phenomenon.
Milton Friedman.
What explains the combination of a “credit crunch” in the US with soaring commodity prices and rising inflation across the globe? Are these unrelated events or part of a bigger picture? The answer is the latter. So far this is not a return to the 1970s. But action is needed to keep this true.
Inflation is a sustained rise in the price level: the result of too much money (or purchasing power) chasing too few goods and services. A one-off jump in commodity prices is not inflation. Nor need such a jump cause inflation. But a continuous rise in the relative price of commodities is a symptom of an inflationary process.
Whenever excess demand hits, the goods whose prices rise first are ones with flexible prices, of which commodities are the prime example. Commodity prices then are a pressure gauge. If we look at what has been happening in recent years, the gauge is showing red. The Goldman Sachs index of commodity prices has doubled since early 2007. Nominal prices of oil have increased by 150 per cent over the same period. The upward movement in commodity prices has persisted for 6½ years. It looks as though too much extra demand is pressing on too little ability to increase global supply.
The result is unexpectedly big increases in overall inflation: the consensus for world consumer price inflation in 2008 has jumped from the 2.4 per cent forecast in February 2007 to the 4.3 per cent forecast in June 2008. These jumps are modest, but not that modest. Nor is the forecast level. If people get used to the idea that inflation can jump like this, the notion may well become embedded in expectations, with dire consequences.
Yet how can we have an incipient global inflationary process when the US economy and those of other significant high-income countries are slowing down? The proximate reason is that the latter matter far less than they used to. The underlying explanation lies in the forces driving both global demand and supply.
On demand, two big things are happening: convergence and the imbalances. Under convergence comes the accelerated growth of emerging economies, above all of China and India. Under imbalances come the interventions in currency markets aimed at supporting competitiveness.
Charles Dumas of London-based Lombard Street Research notes that, at purchasing power parity, China now generates a little over a quarter of world economic growth in a normal year, while emerging and developing countries together generate 70 per cent. Even at market exchange rates, the growth of China’s gross domestic product is as big as that of the US in normal years for both countries.
The emerging countries are also in a good position to keep on growing, largely because they have such strong external positions. Many emerging economies have intervened in currency markets on a huge scale, principally in order to keep export competitiveness up and current account deficits down. Over the seven years to March 2008, global foreign currency reserves jumped by $4,900bn (€3,175bn, £2,505bn), with China’s reserves alone up by $1,500bn. Indeed, as much as 70 per cent of today’s reserves have been accumulated over this period. “Never again,” said the emerging countries hit by crises in the 1980s and 1990s; “not even once,” said China.
Interventionist policies aimed at sustaining export competitiveness expand economies. The results normally include rapid rises in net exports, low interest rates, aimed at curbing the capital inflow, and expansion in the monetary base, despite attempts at sterilisation. The Chinese economy is overheating as a direct result of this trio of effects.
Most of these reserves were accumulated by countries more or less explicitly targeting the US dollar and accumulating US liabilities. The resulting capital flow financed the US trade and current account deficits. But a trade deficit is contractionary: for any given level of domestic demand, it lowers domestic output. Thus, the US needed to expand domestic demand, in order to offset the contractionary effect of the external deficits. Some groups within the economy needed to spend more than their incomes. The most important such group turned out to be households. Thus the growth in US household indebtedness that led to today’s “credit crunch” is a direct result of the global imbalances.
Today, the hapless Federal Reserve is trying to re-expand demand in a post-bubble US economy. The principal impact of its monetary policy comes, however, via a weakening of the US dollar and an expansion of those overheating economies linked to it. To simplify, Ben Bernanke is running the monetary policy of the People’s Bank of China. But the policy appropriate to the US is wildly inappropriate for China and indeed almost all the other countries tied together in the informal dollar zone or, as some economists call it, “Bretton Woods II”.
Thus, not only have the imbalances proved hugely destabilising in the past, but they are going to prove even more destabilising now that the US bubble has burst. When most emerging economies need much tighter monetary policy, they are forced to loosen still further.
Meanwhile, on the supply side of the world economy, almost every piece of news has been bad. Whatever optimism one might feel about long-run possibilities for increased supply of energy, it is impossible to be optimistic about the short run.
What we see then is an incipient global inflation. Yet the central bank with the greatest influence on global monetary policy is the one confronting the post-bubble credit crunch. Its post-bubble predicament is made worse by the soaring energy prices that result from the strong growth of the world economy.
This then is a global challenge. The advanced countries are no longer the global driving force: they are importing inflation. If the world had a single central bank and a single currency, the former would surely tighten its monetary policy, in light of the evidence on the constraints on the rate of growth of potential global supply. In the absence of such a central bank, the right alternative has to be greater exchange rate flexibility and targeting of domestic inflation.
The world as a whole cannot import inflation: if every central bank assumes that the rise in commodity prices is the product of policies made elsewhere, general overheating must be the result. Worse, if that feeds into expectations the world will be depressingly similar to the 1970s. We are not there. Policymakers must ensure we never do get there.
June 17 (Bloomberg) -- Kevin Richmond, a machinist at a bankrupt auto parts plant in Dearborn, Michigan, is an independent voter. While he favors candidates who are strong on defense and conservative on social issues, he may vote for Barack Obama for president. He likes what the Democrat says about keeping jobs in the U.S. with trade agreements more favorable to its workers.
``John McCain would be four more years of George Bush,'' Richmond, 38, says.
Working-class white voters -- those earning less than $50,000 and lacking college degrees -- make up about half of the electorate and hold the key to the White House in November. While $4 gas and stagnant wages under President Bush give Obama a shot to reverse Republican sway over these voters, the Harvard Law School graduate and presumptive Democratic nominee, who earned $4 million last year in book royalties, will have to rough up his elitist image to win them over, says John Podesta, White House chief of staff under Democratic President Bill Clinton.
``Obama has to show that he has the capacity to deliver on bread-and-butter economic issues and give working-class voters a sense that he's going to the White House to fight for them,'' Podesta says.
The Illinois senator lost these voters by large margins in multiple primaries, including Ohio, where they went for Hillary Clinton by 43 points. He campaigns in Burberry suits with perfectly knotted ties even when meeting with workers on the job. In June, he talked with workers in the parking lot of a Rite Aid Corp. distribution center in Troy, Michigan.
No Anger in Obama
``Are we going to continue the failed Bush-McCain economic policies and remain mired in an endless and costly conflict in Iraq, or will we change course and focus on the problems that working families in Michigan and across America are facing every single day?'' Obama, 46, said later that day at Troy High School.
He proposes to roll back some of Bush's tax cuts for wealthy Americans and redirect them to people with incomes under $150,000, expand job retraining and renegotiate trade agreements.
Obama's eloquence -- which draws comparisons to John F. Kennedy -- falls flat with these Americans because it fails to reflect their indignation about rising inequality and jobs going abroad.
``The challenge for Obama is to combine his message of hope with recognition of this anger that these voters feel,'' says Joe Trippi, a former strategist for Democratic presidential candidate John Edwards.
McCain's Millions
The former community organizer does try to connect with lower- and middle-income voters. When he tells crowds he was raised by a single mom who once turned to welfare, he doesn't mention that she was an anthropologist who worked for the Ford Foundation, or that his Kenyan father, who left the family when Obama was 2, was a Harvard-trained economist.
At times, Obama comes across as ignorant of the lives of ordinary Americans. Talking about soaring food prices, the former law professor, who stays trim by shunning French fries and working out daily, asked a group of Iowa farmers if they knew the price of arugula at gourmet grocer Whole Foods.
The working-class credentials of McCain, 71, the son and grandson of Navy admirals, are also thin. McCain's wife, Cindy, who inherited Anheuser-Busch Cos. distributor Hensley & Co., is worth about $100 million.
War Hero
The presumptive Republican nominee and senator from Arizona is banking on his social conservatism -- he opposes abortion and favors gun rights -- and his military record as a Navy captain to win over workers.
``McCain is a veteran and a hero, and the military is a respected institution, especially among the white working class,'' says John Fortier, a congressional scholar at the American Enterprise Institute, a Republican-leaning Washington think tank.
McCain's economic agenda, including an extension of Bush's tax cuts and free trade, is a tougher sell. Bush's cuts, especially lower rates on estates and investment income, went mostly to upper-income Americans. Weekly earnings for nonsupervisory and production workers have risen 1.3 percent since Bush took office in 2001 compared with 6.4 percent during Clinton's eight-year presidency.
`Acid, Amnesty and Abortion'
President Franklin D. Roosevelt's New Deal, which delivered pro-union, big-government programs tailored to manufacturing employees, kept working-class Americans from straying from the Democratic Party for almost four decades. The party's embrace of the civil rights and anti-war movements of the 1960s didn't sit well with white workers. In 1972 they gave Richard Nixon 70 percent of their votes, rejecting George McGovern as the candidate of ``acid, amnesty and abortion,'' a label used by his opponents, according to Ruy Teixeira, co-author of ``America's Forgotten Majority: Why the White Working Class Still Matters'' (Basic Books, 2000).
They flocked to Ronald Reagan's optimism and patriotism in the 1980s before siding with southerner Clinton, nicknamed Bubba, by 1-point margins in his two victories. Workers swung back to the Grand Old Party twice for Bush, who campaigned in cowboy boots and jeans.
``It began with Nixon and the `silent majority,' and then they became the Reagan Democrats, and it was essentially around cultural issues,'' says Curtis Gans, director of the Center for the Study of the American Electorate at American University in Washington.
Midterm Elections
The Democratic takeover of Congress in the 2006 midterm elections was spurred by a return of workers to the party. Congressional Republicans won the group by only 10 points, down from a 20-point margin in 2004 -- a good sign for Obama. ``Obama seems to know what he's doing,'' says Richmond, the Michigan machinist. ``He seems the lesser of the evils.''
The presidential hopeful, whose Democratic support comes from blacks, college graduates and affluent voters, doesn't have to sweep white workers in November.
If he loses this group by no more than 12 points, Teixeira says, he'll probably take the White House.
By Courtney Schlisserman and Shobhana Chandra
June 17 (Bloomberg) -- The U.S. economy may be suffering from its first bout of stagflation since the start of this decade, reports on housing, prices and manufacturing indicated.
Builders broke ground on 975,000 homes at an annual pace in May, the least in 17 years, and construction permits fell, the Commerce Department reported in Washington. Meanwhile, the Labor Department said producer prices jumped 1.4 percent, more than economists forecast. A further report from the Federal Reserve showed industrial production unexpectedly dropped 0.2 percent.
``The latest round of commodity-price pressure is adding to both inflation and weak growth,'' said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York. ``It's a pretty negative cocktail for the economy and financial markets.''
The reports underscore the Fed's dilemma as officials try to prepare investors for an interest-rate increase. Too strong a crackdown on inflation may delay an economic rebound, while waiting too long risks a price outbreak that may need even higher borrowing costs to tame.
``We should be moving sooner rather than later,'' William Poole, a former president of the St. Louis Fed, said in an interview today with Bloomberg Television in New York. ``I don't think you can interpret what's happening with energy as a temporary shock.''
Treasuries rose after the figures, while the dollar was little changed. Benchmark 10-year note yields dropped to 4.24 percent at 10:47 a.m. in New York, from 4.27 percent late yesterday. Stocks were little changed.
`The Stag Part'
``Industrial production is down, that's the stag part, and prices are up, that's the inflation part,'' said Neal Soss, chief economist at Credit Suisse Holdings Inc. in New York. Compared with the 1970s, though, ``it's not likely that inflation will get as out of control when wages do not respond.''
The producer-price index jump exceeded the 1 percent forecast among economists surveyed by Bloomberg News. It was the biggest increase since November. The Labor Department's figures also showed that prices rose 0.2 percent excluding food and energy, a measure that matched economists' predictions. Production was expected to increase 0.1 percent.
``This period of stagflation is lasting longer than expected,'' said Harris. ``It's not to say that we are back in a 1970s-type situation. We have a much more credible central bank,'' no wage and price controls and ``the labor markets are behaving well.''
Foreclosure Impact
Housing starts retreated to a 975,000 annual pace. Analysts forecast a decline to 980,000. Rising foreclosures, higher mortgage rates and declining property values threaten to keep home sales depressed in coming months, discouraging builders from starting new projects. Spending on residential projects may continue to be a drag on growth the rest of this year as builders try to work off excess inventories.
``The downtrend is still in place,'' said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. ``Inventories are still very high, prices are still coming down. None of that argues for a turnaround yet.''
Starts decreased in three of four regions, led by a 25 percent drop in the Midwest. Construction fell 10 percent in the West and 4.4 percent in the South. Starts increased 62 percent in the Northeast, led by a rebound in multifamily projects.
Residential construction has subtracted from economic growth every quarter since the first three months of 2006, culminating in a 25.5 percent drop in the first quarter that was the largest since 1981.
Hovnanian, Toll
Hovnanian Enterprises Inc., New Jersey's largest homebuilder, reported its seventh consecutive quarterly loss on June 3 and said the value of its land continued to decline. Toll Brothers Inc., the largest U.S. builder of luxury homes, reported its third consecutive quarterly loss the same day.
Producers paid 7.2 percent more for goods from May 2007, compared with a 6.5 percent gain in the 12 months ended in April. Excluding food and energy, the increase was 3 percent from a year earlier, the same as in the prior month.
Food was 0.8 percent more costly, after no change the previous month. Pork increased by the most since 1999.
Gasoline, Diesel
Producers paid 9.3 percent more for gasoline, the biggest increase since November, and diesel fuel gained 11.2 percent, the report showed. Natural gas costs were up 5.7 percent from the previous month.
The wholesale-price report is based on figures for the Tuesday of the week that includes the 13th of the month. On that basis, crude oil cost about $12 a barrel more in May on the New York Mercantile Exchange than the prior month. Oil futures prices reached a record $139.89 a barrel yesterday.
Some companies are trying to recoup expenses. Dr Pepper Snapple Group Inc., the beverage company spun off by Cadbury Schweppes Plc in April, said first-quarter profit rose after it raised prices to counter soaring ingredient and fuel costs.
``Our industry, and the economy as a whole, continue to face significant headwinds especially in the area of higher commodities and fuel costs,'' Chief Executive Officer Larry Young said on a conference call this month.
Others are finding it tough to keep up with the jump in costs. FedEx Corp., the second-largest U.S. package-shipping company, in May cut its profit forecast for the second time this year after surging fuel prices raised costs by at least $100 million more than estimated. FedEx had already boosted its fuel surcharge on express shipments in early May.
``While we have dynamic fuel surcharges in place, they cannot keep pace in the short-term with rapidly rising fuel prices,'' Chief Financial Officer Alan Graf said in a statement last month.
June 17 (Bloomberg) -- U.S. stocks fell for the first time in four days as Goldman Sachs Group Inc. predicted banks will have to raise $65 billion in new capital to cover losses and housing starts and industrial production trailed forecasts.
Zions Bancorporation tumbled the most in eight years after the Salt Lake City-based lender projected more losses from bad loans and Goldman said it remains ``cautious'' on regional banks. All 23 companies in the Standard & Poor's 500 Banks Index declined as the group slumped to its lowest level since 1996. Boeing Co. and Deere & Co. retreated on the unexpected drop in production, while Lennar Corp. led builders lower on a report showing new-home starts slumped to a 17-year low.
The S&P 500 lost 9.21 points, or 0.7 percent, to 1,350.93. The Dow Jones Industrial Average declined 108.78, or 0.9 percent, to 12,160.3. The Nasdaq Composite Index slid 17.05, or 0.7 percent, to 2,457.73. Two stocks fell for each that advanced on the New York Stock Exchange.
``The growth in the market is going to be in companies that increase the supply of materials and commodities, and the area that's going to struggle is going to be financials because they're going to go through this long period of deleveraging,'' said Richard Campagna, portfolio manager at Provident Investment Counsel in Pasadena, California, which manages $3 billion. ``I don't see that changing for the next bunch of years.''
Stocks opened higher after better-than-estimated earnings at Goldman, the world's biggest securities firm, spurred speculation that the worst losses at financial companies are over. Today's retreat snapped a three day streak of gains for the S&P 500, its longest of the month.
Fair Enough?
Whether Affirmative Action Has Run Its Course
WARREN, Mich. -- Stan Sheyn, a white student who attends community college in this working-class Detroit suburb, supports Barack Obama for president. But he has no time for what he calls "double standards and propagation of victim mentality."
"The fact that a black man can run for the position of the President of the United States of America only corroborates that there is enough opportunity and equality for great things like that to happen," he says. "And that there is no need to create special advantages for any demographic group."
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Electra Fulbright, a black small-business consultant in prosperous Southfield, Mich., couldn't disagree more.
"Obama's privileges and his accomplishments are minute compared to the black population at large," says Ms. Fulbright, who plans to vote for Sen. Obama. "When we talk about Obama, we are not talking about the average black American. There is injustice in this country, and until we correct it, we need affirmative action."
Few issues have been as incendiary in the workplace and on college campuses as affirmative action -- in large part because so many blacks and whites have been personally affected by affirmative action, in ways both good and bad.
Now, Sen. Obama's rise is prompting some whites to ask -- and some blacks to fear -- the question: Does America still need affirmative action, given that an African-American has made it to the top of American politics?
The question has been asked before, as other blacks have risen to high positions. But Sen. Obama's swift ascent to the verge of the presidency may have created a turning point in the debate.
![[Affirmative action signs]](http://s.wsj.net/public/resources/images/P1-AL927_AFFIRM_20080613121615.jpg) |
| Associated Press |
| Affirmative action has stirred controversy for decades, including this 2002 protest. |
The issue of affirmative action is likely to dog Sen. Obama on the campaign trail as he seeks to win over white blue-collar voters in battleground states like Michigan. For many of these voters, affirmative action has been divisive since the 1970s. Ward Connerly, a prominent affirmative-action opponent, is seeking to place anti-affirmative action referendums on the ballot in Arizona, Nebraska and Colorado. Voters would be asked to ban "preferential treatment" of women and minorities in state university admissions, the filling of state-funded jobs and awarding of state contracts.
Favoring the Middle Class
White anger over affirmative action has diminished as the Supreme Court has systematically narrowed the scope of programs in colleges and the workplace. Still, the gap between black and white opinion remains wide.
More than half of blacks -- 57% -- say the country should make "every effort to improve the position of blacks and minorities, even if it means giving preferential treatment," according to a poll conducted last year by the Pew Research Center, a non-partisan Washington think tank that studies social attitudes. Just 27% of whites agree with that view. The same poll shows that nearly half of whites -- 48% -- believe the U.S. has "gone too far in pushing equal rights in this country." Far fewer African Americans -- 27% -- agree.
Opinions about affirmative action vary depending on how researchers word their questions; support tends to grow, for example, when the question describes the programs in more detail. But the Gallup polling firm says that regardless of the wording, all of its surveys on affirmative action show blacks overwhelmingly support it, while whites tend to be much more divided.
Sen. Obama's success has also stirred an uncomfortable debate within the black community over who has reaped the gains of affirmative action. Some argue the policies skew toward middle-class blacks instead of poor blacks, and have favored too many individuals like Sen. Obama -- people with a biracial background or the children of African and Caribbean immigrants, as opposed to blacks born in the U.S.
In a 2000 interview with the Journal of Blacks in Higher Education, Sen. Obama, then an Illinois state senator, said: "I have no way of knowing if I was a beneficiary of affirmative action either in my admission to Harvard or my initial election to the [Harvard Law] Review. If I was, then I am certainly not ashamed of the fact, for I would argue that affirmative action is important precisely because those who benefit typically rise to the challenge when given an opportunity."
Sen. Obama's newfound prominence has also prompted some successful blacks to wonder whether his achievements, and theirs, mean affirmative action should be modified to help poor and working-class whites.
"You have this traditional assumption that whites have made it and have it all -- that 'because I am black, I am disadvantaged,' and 'because I am white, I am advantaged,' " says Rev. Carlyle Stewart, who holds degrees from the University of Chicago and Northwestern and heads a large middle-class black church in Southfield, a short drive from Warren. "It may be time to broaden that discussion."
Sen. Obama "believes that no one can deny that our country has made tremendous progress in the past 50 years," said campaign spokesman Tommy Vietor in a statement. "But the suggestion that somehow Senator Obama's campaign represents an easy shortcut to racial reconciliation is just not realistic." He said Sen. Obama believes "affirmative action in universities today is appropriate only if race is one of many factors. The Supreme Court has made that clear."
Republican presidential nominee Sen. John McCain opposes "affirmative action plans and quotas that give weight to one group of Americans at the expense of another," says McCain spokesman Tucker Bounds. "Plans that result in quotas, where such plans have not been judicially created to remedy a specific, proven act of discrimination, only result in more discrimination and violate the concept of equality of opportunity."
Early Challenges
Affirmative action began in 1961, when President Kennedy issued an executive order declaring that federal contractors should "take affirmative action" to integrate their work forces.
The initiative broadened to include policies that favored women and minorities in hiring and promotion at work and in college admissions, the goal being to overcome past discrimination.
Many whites charged that this amounted to "reverse discrimination." In the landmark Bakke case of 1978, the Supreme Court narrowed the definition of affirmative action, declaring unconstitutional the use of some rigid quota systems. But it upheld the principle of affirmative action.
In 2003, a more-conservative Supreme Court again upheld the principle of affirmative action, but narrowed the interpretation still further, adding in a majority opinion, "We expect that 25 years from now, the use of racial preferences will no longer be necessary." Opponents of affirmative action recently filed another suit challenging affirmative action in Texas.
Many economists and sociologists agree that affirmative-action programs have helped spur the growth of the black middle and upper classes, defined as households making more than $40,000 a year. Today, this group accounts for about 40% of black households, up from about 25% in 1970, according to U.S. Census figures. During that same period, the percentage of white households in the middle class and above has risen to about 60%, from just under 50%.
Affirmative action policies have helped blacks gain access to large corporations and top universities, studies have shown, and the presence of blacks in these places has encouraged others to follow. The number of African Americans at the country's top 50 colleges and universities has doubled in recent decades, according to Harry Holzer, a Georgetown University economist. Women have benefited, too, especially in the 1970s and 1980s, when they began breaking into traditionally male-dominated fields.
A Leg Up for Whites
Michigan's Macomb County is home to many of the fabled "Reagan Democrats," the conservative working-class whites who left the Democratic Party largely over social issues including race in the 1980s. Here, life has been changed by affirmative action and the rise of the black middle class. In the past five years, the African-American population has doubled to about 6% from about 3%, in part as blacks have left Detroit for safer suburbs with better schools.
![[Bakke]](http://s.wsj.net/public/resources/images/P1-AL929_AFFIRM_20080613170814.jpg) |
| Associated Press |
| Allan Bakke graduates from the U.C. Davis medical school after a Supreme Court ruling granted him admission in 1978 |
Such changes make some whites here wonder why affirmative action is needed at all. "If blacks are living in the same houses that I am living in, and they can afford the same things I can afford, why shouldn't I have the same breaks as they do?" says Tony Licata, a professional photographer in Macomb County who is white and says he is leaning toward voting for Sen. McCain.
"Race should not be the deciding point about who gets what," says Jessalin Horne, a white working-class college student who plans to vote for Sen. Obama in the fall.
In conversations, many white blue-collar and middle-class workers in Macomb County said they blame competition from China, India and elsewhere for their job losses, not competition from blacks. But the economic battering that many poor and working-class whites have taken as Michigan's auto industry has shrunk makes some whites feel that it's their turn for a leg up.
"I have been a supporter of affirmative action, but it needs to be refocused -- other groups need to be included," says Marceia Lugo, a divorced white mother of three whose mother and ex-husband have left Michigan to look for work. Ms. Lugo says she backed Sen. Clinton but will now vote for Sen. Obama. "I am not black, so I don't know those issues. But I have been poor, and I have had to struggle, so I should get special treatment."
Wooed by Elite Colleges
A half-hour drive from Warren lies Southfield, Mich., a leafy, integrated middle-class and upper-middle-class suburb that is a testament to the impact of affirmative action. Barbara Talley, now a retired financial analyst and a Southfield resident, became one of the first black owners of a KFC franchise in the 1980s, after Rev. Jesse Jackson lobbied the company to sell more franchises to African Americans. Wanda Cook-Robinson, Southfield's black school superintendent, has been the first black in several teaching and administrative positions at area schools. "That wouldn't have happened without affirmative action," says Ms. Cook-Robinson.
Many blacks here don't want to lose the boost that they say affirmative action gives them. Stephen Kemp, a successful black funeral director in Southfield, sends his son to a $24,000-a-year private high school. His son, a junior, has been receiving letters from elite colleges wooing him to apply. "When they look at his application they see he is an African-American male -- he has so much opportunity," says Mr. Kemp, who himself attended the University of Michigan. "Brown called him yesterday."
![[President Lyndon B. Johnson turns to the Rev. Martin Luther King Jr. during the signing of the Civil Rights Act]](http://s.wsj.net/public/resources/images/OB-BQ230_AFFIRM_20080613221401.jpg) |
| Associated Press |
| President Lyndon B. Johnson turns to the Rev. Martin Luther King Jr. during the signing of the Civil Rights Act |
Mr. Kemp thinks it is fine that his son gets special attention, because diversity on campus benefits whites as well as blacks. "If you are getting a true education, that has to reflect all kinds of people," he says.
The election, especially Sen. Obama's success in winning white voters, has Mary Donaldson thinking that affirmative action is likely to fade away in coming years as the country continues to change. "My son is 9 years old. Just because he is black, he can't think he's going to get special treatment," says Ms. Donaldson, who works at a pre-school in Southfield and supports Sen. Obama. "I don't want him to totally depend on something like that."
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Twyla Griffin, who works for a health-care company and attends church in Southfield, says she thinks bias lives on. "It's fear -- 'this black boy is going to take my little white Johnny's job,' " says Ms. Griffin. Affirmative action, she says, simply levels a still-tilted playing field.
"It would be great if Obama made all the decisions for us, but there are a lot of people who still have decision-making power who are still a little prejudiced," says Marilyn Hobbs, an intellectual-property manager who supports Sen. Obama
James Jackson, a black banker and another Obama supporter, nods in agreement. He says he doesn't put his photograph on his business card like many of his white colleagues, because he thinks it will discourage white customers. "Race is a real issue still, no matter what happens in November," he says.
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