The Perils of a Trumped World

3 min
Ludovic Subran
Ludovic Subran Chief Economist for Euler Hermes

I think Trump may be one of those figures in history who appears from time to time to mark the end of an era and to force it to give up its old pretenses. It doesn’t necessarily mean that he knows this, or that he is considering any great alternative. It could just be an accident.

When Henry Kissinger, the grand consigliere of American diplomacy, 95 years old, said those words, he had me wonder. What if what I thought to be a four-year pause for America as the most-respected benevolent hegemon in history could as well be the beginning of a grave new world without any? What if the US continued to disengage from supplying the world with pivotal public goods and rules of the game for the greater good?

Almost thirty years after the Washington Consensus became the norm for international policy-making, and ten years after the global financial crisis, it looks like we’re going back in time. History- and science-proof policy benchmarks (and sheer common sense) are being overruled or blatantly questioned tweet after tweet. Six months ago, the benefits of free trade and the ensuing trade war; five months ago those of smart financial regulation, then came net neutrality and attacks against the press, threats to withdraw from a range of global platforms including those for security and defense, and just a week ago, the independence of the Federal Reserve – the only reason the dollar became the epitome of trust it is today.

Where will it (he) stop? It’s hard to say as chain reactions are ignited. First lose canons and new cowboys of economic policy-making are multiplying faster than ideas to solve global issues. Disrespectful diplomacy, once an oxymoron, is now “a thing”. Secondly cronyism and identity economics –just like identity politics– cater to short-term instinctive needs, thus hard to rationalize or prove wrong. Third, risks are piling up faster than we think. There is a higher likelihood of policy mistakes to offset negative externalities of previous ones. The divestment from long-term stabilizers and innovation and structural wedges between nations will make coordination harder when the next crisis strikes.

We may have missed an opportunity to reconcile free-trade and full employment, entrepreneurship and safety nets, innovation and regulation, growth and equity. International institutions and globalists alike may have underestimated how urgent and pivotal the need for a new paradigm was. President Trump does offer an alternative and a new style - for the US only. Is anyone ready to take the baton for issues beyond the American border? Not really. The Chinese model is difficult to replicate and Europe is busy once again with very domestic decisions to make. Re-incentivizing the creation of common goods (maybe with a European twist to it?) is essential. It is not too late, never.