Let me say this first: I am not a fan of Donald Trump. The leader in last week’s The Economist sits well with my feelings: The Dividing of America: Donald Trump’s nomination in Cleveland will put a thriving country at risk of a great, self-inflicted wound. The article highlights how the facts are quite different from the rhetoric.
As we know now, Trumps’ acceptance speech was very Nixon-like in that it portrayed a negative America that needs saving. I certainly believe that Trump’s business and some economic policies might favor high (GDP) growth, but even in this department, some of Trump’s polices are anti-global trade and so will reduce growth. Worse, his apparent temperament and terminology, let alone immigration and foreign policy, puts the backs up of many, left and right. In a nutshell, most of Trump’s policies are populist.
And for total transparency, I actually dislike Clinton: she has demonstrated poor judgement, represents the establishment of big and bigger government, tax-based growth, large busines/lobbies and whatever her rhetoric, just look at her and Bill’s net worth. She is the epitome, the ultimate, political animal.
What I have to applaud is the US political system. After 8 years of gridlock, and since the early 70s, the US system has been leading up to this point. The Opinion piece in today’s Wall Street Journal, Why the Democrats Have Turned Left, by Ruy Teixeira of the Center of American Profress, captures the point with the idea of “equitable growth”. The idea is that capitalism as we know it creates more inequality. Growing inequality slows growth. Faster growth could alleviate these problems but that leads to increased inequality and so on. And apparently the Clinton elixir of taxing innovation and wealth creation (her band of capitalism) will save the day. Not one of her policies in the past has led to sustained economic growth.
It’s not capitalism that is at fault here, it’s the political system. The fact that every 4 or 8 years we flip-flop captains and direction, let alone direction changed mid-term, and in each case what passes as capitalism itself changes. We have seen more socialism, funded off the back of capitalism, than you can shake a stick at. Even the media are party to the game.
The causes of the financial crisis are many but popularism suggest that poorly regulated selfish bankers were the true cause. They played a part, yes, but selfish poor homeowners who preferred to accept dodgy deals than work harder and wait their tern, were also at fault. But that is not politically correct, and as such, seems Trump-like. More at fault were republican and democratic presidents that signed off on socialist programs and policies to increase home ownership at the low end of the income and wealth scale, thus creating the original bubble. The financial industry simply exploited the creation. But this is not the story you read in the papers and nor do you hear left or right politician admit it. They are all in this thing together: for their own sake.
What I admire about the US system is that it has allowed itself to come to this near breaking-point. At one point we almost conceived of Trump v Saunders; two extremists. Now we end up with the establishment (Clinton) versus the wrecking-ball (Trump). And with the choice comes calamity in either case. But that calamity will be tempered by the changes in House and Senate control. What the system has nearly given us is a chance for extremism to be evaluated.
If Trump wins, the US will certainly go through changes. If the House and Senate stay with the Republicans, the country will see radical changes that will likely create rapid growth (short term) but potentially global and even social damage (medium term). There is a slight chance that it all comes out well but it does not look promising.
In the other hand, if Clinton wins, and he House and Senate remain unchanged, we will have more gridlock and continued economic malaise. Inequality will continue to worsen, mainly due to a need to increase quantitative easing and helicopter money from the Fed and its banks. Innovation will further be eroded (the US has fewer start-up firms per year than at any time in its history) and wealth creating engines will be replaced with government led programs and the printing presses. All this works for a while; until China’s role in currency reserves changes. At that point Clinton’s clothes will vanish- and with it, the American economy and standard of living.
As such there is a chance that in either case, the damage will be significant enough that four years later, a real progressive conservative hybrid president and house and senate will get established. A new middle ground might appear, focused on smaller government but smarter government too. The problem is we have to wait 4 years for the current experiment to play out. And worse, the Supreme Court will be changed for a lifetime. In either case, it 2 or 3 new appointments will shift its markedly left or right for many years to come. Whoever wins, this next general election will have a lot to answer for in the future.