Populism for good? Shamubeel Eaqub on presidential policy
Can populism be a force for good? Guest columnist Shamubeel Eaqub takes a look at what’s ahead from Trump’s US presidency.
Trump, a person with little political or public policy experience, is now the president of the biggest economy and arguably the most geopolitically important country in the world. What he will bring for America, its economy, its people and its hegemony in the world order, is decidedly uncertain.
But we know one thing with reasonable surety. 2016 was the end of the neoliberal political and economic order of the 70s and 80s, and 2017 is the beginning of the new order of populism.
The root cause of rejecting the neoliberal economic and political order is most likely the long shadow of deepening inequality that began in the 1980s. It was around the same time that children were less likely to be better off than their parents. The strong gains in overall economic growth accrued to a smaller group, and those at the bottom are now angry.
Trump is a man of contrasts and no internal consistency, not too different to populism in general. It is hard to collate his election promises into an actual policy agenda.
The best guide we have to Trump’s presidency is around a rejection of free trade, bringing back manufacturing jobs to America, tax cuts and spending more on infrastructure.
On free trade, Trump appears to believe in a dangerous idea that gains to one country come at the cost of another. Trade can be good for both trading partners, making them both better off. Rapidly growing global trade has been a critical part of a massive reduction in global poverty in recent decades.
America’s withdrawal from free trade agreements and introduction of punitive tariffs may raise the ire of other countries. But any who take on an economic superpower with organisations like the World Trade Organisation, will only expose their impotence to impose sanctions on America.
While Trump rejects the free movement of goods and services, not so for finance. He seems set on easing regulations on finance that were imposed after the Global Financial Crisis.
Trump’s promise to bring back local manufacturing jobs will be hard. The evidence on incentives to hold onto uncompetitive businesses by States has a dismal track record.
But promised tax cuts and infrastructure investment are likely to represent a significant boost to the economy. Infrastructure investment is long overdue in America and is very welcome.
Spending more and taxing less means America’s government debt burden will balloon in future years. This can make the country vulnerable to shocks, but Japan’s experience suggests it is probably not a looming crisis.
While the economic policies seem divided and contradictory, my main concern is Trump’s narrow and incoherent world view. Led by Trump. America’s post war hegemony on the world stage, particularly on global co-operation, is what will fail first. There is no natural heir – except a rise of populism.
Populism could still turn out to be a force for good. But only if a forward-looking and optimistic, populist narrative emerges.