Eh? Trump is the living embodiment of Neo-liberalism.
Trump identified the problem of communities which have been left out of the nation’s economic success over the last two decades, and offered solutions. Between 1996 and 2013 annual per-capita US GDP has grown from around $30,000 to $53,000. But most households haven’t shared equally in that. US real median household income has been on a downward trend since 1999 and (after a second temporary blip in 2007) is now back where it was in 1996.
His campaign was based on fixing the economy for those people and they voted for it; he also provided endless distractions with his comments and behaviour. The Democrats responded by attacking his personal suitability but didn’t make the case for the economy. In the end, it was the economy stupid.
Trump’s solution for those who’ve been left behind is to blame it on foreigners – immigration and trade – and build the walls to keep them out.
This is mercantilism – trade is a zero-sum game and America will be better off if he negotiates tougher terms to raise the price of imports, which will hurt the foreigners and benefit America.
Most likely he will pick on limited product areas, such as steel, to attempt to revive the US industries which have suffered, whilst allowing iphones to travel unimpeded.
His view of trade and globalisation seems commonplace, but the root cause of the losses of those rust-belt communities isn’t trade, it’s technological change. The productive businesses which generated wealth for those communities in the past have been overtaken by changes in technology, and those communities are struggling to find new roles. Whilst the pace of change has been increasing, there hasn’t been an effective policy response either in the US or the UK.
The neo-liberal response of ‘let them make their own way’ hasn’t worked.
There’s also the increasingly unequal distribution of the spoils of economic success.
Trump’s solution is a programme of public infrastructure building, and tax cuts which will keep the Republican Congress on side. So the spending taps will open. The infrastructure spending will stimulate the economy broadly, but leaves the underlying issues of technological change and income distribution unaddressed.
If he succeeds, expect inflation to rise, the Fed to raise interest rates to compensate and Trump to attempt to loosen the Fed’s grip by appointing dovish board members and Chair.
Still, unless he provokes another global financial crisis by blocking trade, or causes a geopolitical upset, it should be enough to secure a second term.
