I've been told by some very sensible people that the rise of Trump is not too bad because politics needed a serious shake up and there was a very cosy consensus around neoliberal ideas. My response has been that it is all very well to see people move away from dangerously smug establishment thinking and establishment politicians. Unfortunately we are moving away from them in the wrong direction. There are worse things than liberal ideas and there are much worse things than parliamentary democracy no matter how much it is degraded by walls of money being spent on elections. I would rather have someone follow any kind of remotely liberal agenda any day of the week than see what was once the most powerful country in the world led by someone who is obsessed with the cult of his own personality and follows no agenda other than what he thinks is most in his own interest.
I have also been told by a lot of people that Trump will wise up and become more of a statesman now he is in power and it won't be as bad as we are all expecting. I simply don't believe this. My first reason for thinking this is that the man got to power by appealing to the lowest common denominator of fear of foreigners. Why would he ditch a formula that has worked so well for him personally? His bad example is now there for any future politician to learn from. We must therefore take it for granted that however nationalistic and unpleasant our politicians become there will always be someone willing to be even more nationalistic and unpleasant since that is a very realistic route to power. We know how that worked out in Yugoslavia. My second reason is that Trump cannot wise up and become a safe establishment figure without leaving his supporters feeling utterly betrayed and abandoned. He knows that he will be expected to deliver on the vast bulk of what he said and so will try very hard to put his rhetoric into practice. I also happen to think that he sincerely believes his own propaganda. That is what worries me most of all!
But we need to get beyond worries and try to consider what might happen when he tries to put theory into practice. Is there any prospect of any of it actually proving successful? The main policies that he has stated are:
1. The wall and control over immigration
2. Ending many free trade deals
3. Cutting of taxes
4. Reducing cost of welfare especially health care
5. Removing all major environmental protections
6. Rebuilding infrastructure
Most of these policies cost money. You cannot build a 1,900 mile wall across some of the world's most inhospitable territory without encountering costs. There is no known mechanism for getting the Mexicans either in or out of the US to pay for that wall. It is no small project. Traditional Keynsian economics tells us that if you put a lot of people to work building walls and renewing infrastructure then you will get a strong stimulus to the economy and put people back to work.
The slight problem is that when the people who've been building that infrastructure collect their pay they then get to spend it on whatever they like. If what they like is Chinese made televisions and Malaysian cars then the US will be faced with a worsening of an already scary balance of payments problem, an international nervousness about the stability of the dollar and horrible increases in the national debt. Large tax cuts combined with large increases in put expenditure doesn't easily add up. It is almost certain to further worsen an already problematic budgetary crisis and it is hard to see how cuts in welfare spending can possibly plug the gap. The US national debt and its balance of payments gap is currently covered by international investors buying US bonds in the belief that they are very secure. Any worries about US financial stability under Trump could cause some of those investors to move those assets in order to put them somewhere safer. If that happens in any volume then expect it to trigger a financial crisis that will make 2008 look like a quiet year.
Trump will try and prevent this by putting up trade barriers. This almost always works in the very short term. Immediately after they are imposed people will look to spend their money on cheaper US alternatives. Provided, of course, that anyone in the US still makes the item. Nevertheless it is bound to result in some improvement in the US jobs market. Along with some inflation. In the medium term two things always happen when tariffs are put up. One is that other countries retaliate and put up their own trade barriers and the job gains are quickly wiped out. The other is that your businesses become even more inefficient relative to those in other parts of the world where they are exposed to the pressures of competition. Before long they can't even compete behind the tariff barrier. Spain and Portugal were once the richest countries in the world. They tried to put tariff barriers in place to fend off competition from British factories. The result was those countries went into a slow and steady decline whilst Britain got steadily richer. The same thing happened to China in the 1800s and it took them two revolutions, several wars and much chaos before they got over the consequences. To see how ludicrous the idea is you only have to consider how well it would work if I persuaded the good people of Skipton to vote for me because I would build them a wall and get the Lancastrians to pay for it. We could wallow in our nostalgia behind our tariff walls but the rest of the world would carry on making technological developments and getting further ahead of us.
So in the long term the tariff barriers will be counterproductive. But this doesn't mean they won't work for a while. An unfunded stimulus, coupled with tariff walls could very easily create a quick and unsustainable boost to the US economy. I therefore think there is a chance that Trump's economics may just possibly look pretty good to some sections of the US population for a couple of years. Then they will start to go sour. If he is clever - and he is - then he might figure out that he can fund some of this by simply printing dollars and using them more constructively than on quantitative easing. That could give him quite a lot more time. If he is lucky - and he is - then he might make it through to the next election before the flaws become really obvious.
Put simply there is a genuine risk that Trump may be able to pull off the appearance of having achieved a quick fix. But it will be very insecure and can only work for a short period of time. The challenge for the rest of us is going to be to keep pointing out again and again that it cannot be sustained and that sooner or later the only alternative is to invest in modern technology and modern skills and those aren't going to be in the moribund oil and gas industry.
What looks to you to be the best policy? Build a wall and try and shut out the next generation of technology. Or try and understand that technology and get your country at the forefront of developing and implementing it? Donald Trump has just set American on the course of a long term decline. The rest of the world has to decide whether it wishes to copy the policies of a superpower heading into decline and go down with it or to invest in the economics and politics of hope.
I know which I prefer.