Where does Donald Trump control the US economy? The experiences with other populist leaders have something to expect – and little good.

The world wondering. What will Donald Trump? What kind of President he will be? He plunges America and the rest of the world into chaos? Or is so bad at the end maybe everything?

A lot is still open. There is still no government team. How his relationship with the Parliament will be, must prove. Something like a program does not exist, not even in economic policy, which was the central theme of the election campaign.

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So much is already said: If Trump is to implement earlier announcements, the US will stir the financial markets worldwide. Interest rates and exchange rates are already straining now, investors should prepare themselves for one or other roller coaster ride. The new president is expected to demand lower export surpluses and higher armament expenditures from important partner countries, especially from Germany.

This all sounds a bit like retro economic policy: after the early 1980s, when Ronald Reagan put a few exciting first years, but then proved to be a very successful president. The difference is just: Reagan was not a populist. He was a conservative story-teller, a stubborn anti- communist and a market-liberal. His thinking was based on a set of beliefs that made him make unpopular decisions.

But what is Trump’s conviction? Obviously not many. After decades of filling the gossip columns and reality TV formats as a public figure, there is so much to say: Trump wants to be admired and admired. He wants recognition. It is therefore not unintentional to assume that his economic policy will initially focus on survey values. Main, he is popular. This means, however, that if its popularity values ​​go down into the basement, it could become quite uncomfortable.

What we have learned about populism

There are various experiences with populist economic policy. Latin America has been going through populist phases for decades. Europe has experienced the Italian Premier Silvio Berlusconi and is now dealing with Viktor Orbán in Hungary. Recep Tayyip Erdogan’s policy was also populist, before he became an autocrat. Examples, some of which can be deduced:

Macro beats micro.
Populism as a political current and strategy is based on overcoming conflicting interests in the population. The unity of the people is evoked, a great We constructed. The arduous business of microeconomic structural reforms does not fit into this basic orientation. Whoever wants to improve the functioning of markets and institutions will inevitably produce losers. There are resistances, strikes, anger. Populist economic policy is therefore typically focussed on macroeconomic instruments: state social and investment programs, tax cuts, low interest rates. Independent note banks are only partially compatible with this approach.

Short beats long.

Populists tend to radically simplify complex issues – and to correspondingly simple proposals for solutions. Anyone who has promised speedy problem solving in the election campaign tends to turn to economic-political adjustment screws, which promise fast action. Whether these measures are sustainable in the long term is another matter.
Inside beats outside.

Populist policy is, in principle, compatible with an internationally oriented economy. In its boom years, Erdogan’s Turkey was an open economy, inviting foreign investors. Orbán’s Hungary has nothing to do with international corporations that are active in the country. As long as jobs and income are generated in the country, there is no conflict. It becomes problematic when the economy is no longer running. Then, in doubt, the short-term protection of domestic jobs has priority, see the rigid customs policy of Argentina and Brazil in recent years.
Staging proposes substance.

If the popularity of the populist leader is the main focus of politics, it may be enough to carry out a large, colorful public drama – and to largely omit economic policy action. Silvio Berlusconi, for example, had no room for maneuver in Macropolitics – as a member of the Eurozone, Italy could neither pursue its own monetary or independent financial policy. He simply did not tackle necessary but unpopular structural reforms. What remained was an always trivial, sometimes frivolous and often embarrassing polite theater. The last few years under which Italy still suffers.
It is possible for Trump to become a kind of American Berlusconi: the main actor in a daily reality soap, a state-run producer and himself. In this scenario, the governing of a conservative team would take over vice-president Mike Pence, with a conservative-dominated congress A minimum program – a few tax reductions, moderate expenditure increases – and otherwise Trumps announcements of broad announcements.

As long as the economy continues, jobs continue to emerge and inflation does not get out of hand, that could be enough to keep the President’s polls high. Trumps role would be limited to showing America’s alleged new greatness.

What if there are problems?

But if the economy starts to stutter, it is likely that its popularity will not be far. Then a whole different trump could appear: one who is guilty of the misery – one who goes to the point of racism and seeks conflicts with foreign trade partners who are supposed to create unfair advantages; With the US banknote, allegedly stalling the economy with too high interest rates; With rating agencies that accept America’s poorer financial situation with downgrades; With international institutions such as the IMF, the OECD or the WTO, which call on the US to change course.

Actually, the new US president would have enough to grab. The path of economic development has been broken; The production potential is growing by just 1.5 percent a year. In the 1990s, according to OECD calculations, the figure was still 3.2 percent, while in the Nuller years it was 2.2 percent. Who really wants to make America really great again, would have to strive above all to raise the growth path sustainably.

But this is a difficult business. It is about education, for example: from early childhood education to the quality of schools and colleges – beyond expensive private elite institutions, the results of the US education system are poor compared to other rich countries. It is about the environment: the US must significantly reduce its energy and other resource consumption in order to be competitively sustainable. It is about taxes: the increased demands on the state must be financed sustainably. For this, America needs higher tax revenues and a more efficient tax system, such as a general VAT, which is now standard in the developed world.

But all this will not happen. Such structural reforms are controversial, unpopular, lengthy. And therefore unattractive – populist.

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