Donald Trump enters the White House as the least popular new President in modern history. With an approval rating barely touching 40%, an inauguration apparently sparsely attended and global protests highlighting fears about racism, women’s rights, nationalism and American isolationism, this is, as expected, an inauspicious start.
Trump’s inauguration speech sought to underline the phrase ‘America First’ referencing and echoing an uncomfortable period in American history when during the 1940’s, prominent people argued strongly against the country’s entry to the Second World War. The phrase also portends a threat to the current global trading order.
The now infamous Smoot-Hawley Tariff Act of 1930 raised duty on 900 US products, cut global trade by more than 65% in just four years and along with the stock market crash of 1929, was a primary cause of the Great Depression. Following hard on the heels of the Financial Crisis of 2008, the spectre of new protectionism is a risk the world could do without.
With Trump’s inauguration rhetoric differing little from that on the campaign trail, it is entirely understandable that anxiety is high but we must accept the reality that this new administration is with us for at least four years, much in the way that that we must accept that Britain is to leave the EU. Indeed the new President and his acolytes must be given a chance to enact at least part of an agenda that the American electoral system mandated. Here’s why:-
Irrespective of Trump’s brash, boorish personal conduct and questionable perspectives, the issues which led to his election, Brexit before it and the rise of some left, but largely right wing populist agendas in the Western developed world are real, justifiable and here to stay. Indeed we are likely to see further upheaval this year in elections in the Netherlands, France, Germany and potentially, Italy. Without reform at the heart of Europe, a victory for Marine Le Pen in May could herald the end of the European Union, as we know it.
Despite the current turmoil, there can be little doubt the last five hundred years of globalisation and trade has unambiguously raised economic potential and living standards across the entire world. New technologies have improved efficiency and brought millions from poverty into new middle classes. However, this process cannot always be smooth, uniform or without negative consequences. In the last two decades many Western developed economies have suffered the export of jobs to the east, where wages are lower, further de-industrialisation and more recently, the collapse of credit. Globally, wealth has become ever more concentrated in fewer hands, creating an extreme inequality exacerbated by policies of Quantitative Easing, enacted to prevent the collapse of the financial system. In the West real incomes have not risen for fifteen years and the quality of new job creation has been degraded systematically.
In this light it can be no surprise that political movements offering a different vision for the future, a break on globalisation, control of immigration, cultural identity and new jobs are attracting support. Policies to renew creaking infrastructure and regenerate post-industrial heartlands are promised and badly needed. No country can spend its way to prosperity, but targeted investment should raise productivity and improve economic potential for the future, countering the shift of resources eastwards.
Action must also be taken to reverse the trend of inequality and not just for the obvious reasons of social justice. Without wages attracting a greater slice of the productive pie, economic growth in Western economies will remain anaemic, constrained by a lack of demand to satisfy the production of goods and services, both domestically and from abroad. The creation of new skilled jobs would do much to improve the current imbalance.
There are many good reasons for concern about the election of Donald Trump, the rise of populism and many uncomfortable parallels with the past. However, if these events lead to recognition of the underlying causes and action to address them, whilst avoiding the less appealing aspects of the agenda, a new age of prosperity may emerge.
Mike Harris – Independent Director.