Thursday, January 18, 2018

"America First" paradox: can prosperity survive trade wars?


One year into Donald Trump's presidency, the fracture between the pro- and anti- Trump camps has widened to fanatically partisan levels.  A solid core of Trump voters -estimated in between 30 and 38 percent- forms what pundits call "the base" supporting the man well beyond his zig-zagging policies and politics. An equally solid "anti-Trump" coalition has launched a widespread "resistance" among minorities, campuses and a wave of challenges to  traditional GOP seats and states.

Moreover, the level of vitriol and partisan speech in pro- and anti-Trump media disseminates not just two opposite sets of opinions, but opposite "facts". 

From a social and cultural standpoint, the country looks more divided than before, going backwards towards the conflicts between those who want the pre and post 1965 social order.

But in the economic front, Trump is presiding over a wave of growing prosperity, which he has both inherited (see the job creation graphic below) 



and stimulated with de-regulation and tax incentives such as those making Apple repatriate 368 billion dollars and create 20,000 new jobs.  




The stock market is soaring over 26,000 points -creating a wealth effect that also reflects in demand and jobs- and a global recovery and a more competitive dollar are helping as well.

This is the kind of scenario that would make a pro-Trump wave as sure as the 6 percent growth of 1963 did for Lyndon Johnson. But there is one caveat: Trump's behavior and the "uncivil war" 


What is good to close real estate deals might be not as good for running a government with our 1787 Constitutional system. 

Steve Bannon and extreme populists and nationalists in the Far Right want to take down the "checks and balances" that limit single-party rule with the "wrecking ball" -. Trump has zig-zagged (and still does) between those dangerous extremists and making deals the usual Washington way. 

And,  yes, on top of all this there is a special prosecutor with wide powers investigating the President and his campaign.

If the coming midterm elections turn the control of the House to the Democrats, Trump will likely face impeachment, on top of further restrictions on his domestic and international agenda from them and from the Republican party that carried him on its ticket but disagrees with many of his protectionist and nationalistic views.

For Trump's presidency is actually a "RINO" (Republican In Name Only) presidency. A lifelong New York Democrat and an admirer of crony capitalist and strongmen regimes -like those of China and Russia- , Trump wants to manage his Presidency as he managed his company: like the uncontested CEO of a single-owner, family-ran company.

That is not what the US Constitution allows, nor what extreme Far Right zealots like Bannon want. Far Right nationalists want Trump not just to become a "strongman" in the mold of Russian or Chinese autocrats, but to use his power to colonize all powers of government with permanent partisan majorities. 


As it looks now, the country goes in "automatic pilot" through a chaotic escalation of civil discord and an uncivil prosperity. This is, by Americas' own historical experience, an unsustainable path: the one of the "House Divided" speech that Lincoln warned during the antebellum of the 1862-64 Civil War.

Trump is still on time to turn out this destructive path and return to constitutional governance. He showed that he can do it briefly by engaging in one hour of civil, bipartisan bargaining on live TV with senators. But he also has shown a dangerous lack of self-control and stability, governing by way of "tweets" launched at odd hours of the morning.

Less than 48 hours after receiving just praise for his show of civility running a bicameral and bipartisan meeting towards an historical agreement, Trump trashed the agreement and his own GOP partners a few hours later with a new eruption of his customary uncivil behavior.

The coming midterms and the economy will define the future of this dysfunctional but consequential political experiment.

The consequences of the social animosity that this style of government is sowing are setting the entire country decades back in a dangerous path.

Milton Friedman warned in one of his last interviews, back in 2005, that the only way that the dollar and US economic prosperity could fall was precisely if the country lost its credentials of respect for the rule of law.



In 1929, when the stock market was at record highs and economists predicted "a stable plateau of prosperity", Americans lost trusts on their banks and government and then the world lost trust on the stability of US and its institutions, and the 1930 recession turned into the Great Global Depression.

Civility is more than just manners and respect for each other.

It is -at the scale of a country- the other name for the rule of and by the laws that distinguish the places that attract investors and immigrants from those who make them run away.

No comments:

Post a Comment