How Trump hap­pened

Financial Mirror (Cyprus) - - FRONT PAGE -

As for the first ques­tion, though po­lit­i­cal fore­cast­ing is even more dif­fi­cult than eco­nomic fore­cast­ing, the odds are strongly in favour of Hil­lary Clin­ton. Still, the close­ness of the race (at least un­til very re­cently) has been a mys­tery: Clin­ton is one of the most qual­i­fied and well pre­pared pres­i­den­tial can­di­dates that the United States has had, while Trump is one of the least qual­i­fied and worst pre­pared. More­over, Trump’s cam­paign has sur­vived be­hav­iour by him that would have ended a can­di­date’s chances in the past.

So why would Amer­i­cans be play­ing Rus­sian roulette (for that is what even a onein-six chance of a Trump vic­tory means)? Those out­side the US want to know the an­swer, be­cause the out­come af­fects them, too, though they have no in­flu­ence over it.

And that brings us to the sec­ond ques­tion: why did the US Re­pub­li­can Party nom­i­nate a can­di­date that even re­jected?

Ob­vi­ously, many fac­tors helped Trump beat 16 Re­pub­li­can pri­mary chal­lengers to get this far. Per­son­al­i­ties mat­ter, and some peo­ple do seem to warm to Trump’s re­al­i­tyTV per­sona.

But sev­eral un­der­ly­ing fac­tors also ap­pear to have con­trib­uted to the close­ness of the race. For starters, many Amer­i­cans are eco­nom­i­cally worse off than they were a quar­ter-cen­tury ago. The me­dian in­come of full-time male em­ploy­ees is lower than it was 42 years ago, and it is in­creas­ingly dif­fi­cult for those with lim­ited ed­u­ca­tion to get a full­time job that pays de­cent wages.

In­deed, real (in­fla­tion-ad­justed) wages at the bot­tom of the in­come dis­tri­bu­tion are roughly where they were 60 years ago. So it is no sur­prise that Trump finds a large, re­cep­tive au­di­ence when he says the state of the econ­omy is rot­ten. But Trump is wrong both about the diagnosis and the pre­scrip­tion. The US econ­omy as a whole has done well for the last six decades: GDP has in­creased nearly six-fold. But the fruits of that growth have gone to a rel­a­tively few at the top – peo­ple like Trump, ow­ing partly to mas­sive tax cuts that he would ex­tend and deepen.

At the same time, re­forms that po­lit­i­cal lead­ers promised would en­sure pros­per­ity for all – such as trade and fi­nan­cial lib­er­al­i­sa­tion – have not de­liv­ered. Far from it. And those whose stan­dard of liv­ing has stag­nated or de­clined have reached a sim­ple con­clu­sion: Amer­ica’s po­lit­i­cal lead­ers ei­ther didn’t know what they were talk­ing about or were ly­ing (or both).

Trump wants to blame all of Amer­ica’s prob­lems on trade and im­mi­gra­tion. He’s wrong. The US would have faced dein­dus­tri­al­i­sa­tion even with­out freer trade: global em­ploy­ment in man­u­fac­tur­ing has been de­clin­ing, with pro­duc­tiv­ity gains ex­ceed­ing de­mand growth.

its lead­ers

Where the trade agree­ments failed, it was not be­cause the US was out­smarted by its trad­ing part­ners; it was be­cause the US trade agenda was shaped by cor­po­rate in­ter­ests. Amer­ica’s com­pa­nies have done well, and it is the Repub­li­cans who have blocked ef­forts to en­sure that Amer­i­cans made worse off by trade agree­ments would share the ben­e­fits.

Thus, many Amer­i­cans feel buf­feted by forces out­side their con­trol, lead­ing to out­comes that are dis­tinctly un­fair. Long­stand­ing as­sump­tions – that Amer­ica is a land of op­por­tu­nity and that each gen­er­a­tion will be bet­ter off than the last – have been called into ques­tion. The global fi­nan­cial cri­sis may have rep­re­sented a turn­ing point for many vot­ers: their govern­ment saved the rich bankers who had brought the US to the brink of ruin, while seem­ingly do­ing al­most noth­ing for the mil­lions of or­di­nary Amer­i­cans who lost their jobs and homes. The sys­tem not only pro­duced un­fair re­sults, but seemed rigged to do so.

Sup­port for Trump is based, at least partly, on the wide­spread anger stem­ming from that loss of trust in govern­ment. But Trump’s pro­posed poli­cies would make a bad sit­u­a­tion much worse. Surely, another dose of trickle-down eco­nom­ics of the kind he prom­ises, with tax cuts aimed al­most en­tirely at rich Amer­i­cans and cor­po­ra­tions, would pro­duce re­sults no bet­ter than the last time they were tried.

In fact, launch­ing a trade war with China, Mex­ico and other US trad­ing part­ners, as Trump prom­ises, would make all Amer­i­cans poorer and cre­ate new im­ped­i­ments to the global co­op­er­a­tion needed to ad­dress crit­i­cal global prob­lems like the Is­lamic State, global ter­ror­ism, and cli­mate change. Us­ing money that could be in­vested in tech­nol­ogy, ed­u­ca­tion or in­fra­struc­ture to build a wall be­tween the US and Mex­ico is a twofer in terms of wast­ing re­sources.

There are two mes­sages US po­lit­i­cal elites should be hear­ing. The sim­plis­tic neo-lib­eral market-fun­da­men­tal­ist the­o­ries that have shaped so much eco­nomic pol­icy dur­ing the last four decades are badly mis­lead­ing, with GDP growth com­ing at the price of soar­ing in­equal­ity. Trickle-down eco­nom­ics hasn’t and won’t work. Mar­kets don’t ex­ist in a vac­uum. The Thatcher-Rea­gan “rev­o­lu­tion,” which rewrote the rules and re­struc­tured mar­kets for the ben­e­fit of those at the top, suc­ceeded all too well in in­creas­ing in­equal­ity, but ut­terly failed in its mis­sion to in­crease growth.

This leads to the sec­ond mes­sage: we need to re­write the rules of the econ­omy once again, this time to en­sure that or­di­nary cit­i­zens ben­e­fit. Politi­cians in the US and else­where who ig­nore this les­son will be held ac­count­able. Change en­tails risk. But the Trump phe­nom­e­non – and more than a few sim­i­lar po­lit­i­cal de­vel­op­ments in Europe – has re­vealed the far greater risks en­tailed by fail­ing to heed this mes­sage: so­ci­eties di­vided, democ­ra­cies un­der­mined and economies weak­ened.

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