Clearly it’s easier being an economic versus political forecaster. And I’m glad not to be a pollster. Boy, did they get the presidential election wrong!
Teaching strategy and decision support in China this year brought more political discussion. While discussing Chinese politics is somewhat taboo, many people I spoke to had one English word I could definitely understand: “Trump.” Many wanted to know who I voted for to which I replied, “I typically don’t share my voting, but I will tell you I could not vote for Trump.”
That’s true, as I could never get comfortable with his ethics. Neither did I vote for Clinton.
I checked into a western hotel to get a broader selection of the news than CCTV, the Chinese news station. So instead of switching between Fox and CNN, I switched between CCTV, BBC and Bloomberg. I watched in disbelief as a non-politician nailed the “narrow path to victory.” I never saw him as a Republican (and still don’t), and I laughed when he announced his candidacy. He could never be nominated, much less be elected. I was wrong.
The world defines Trump from the perspective of “protection.” Economic protectionist on the one hand and military “protect yourself” on the other. This is a clear political shift from post-WWII globalism to isolationism. Whether politics becomes official and enduring policy remains to be seen. The Chinese see both good and bad outcomes. Eighteen percent of their exports are to the United States, so they have to be concerned. But they did not like Clinton’s Asian Pacific pivot where the U.S. was willing to assist the other Asian nations by focusing more on Chinese containment. Europe was already running scared from their own problems and now is in temporary panic. Trump’s personality emulates the other strongman in their lives, Putin, and they fear being left to fend for themselves. Brexit was a protectionist precursor and now strong anti-immigration sentiment is American-sanctioned. Mexico probably fears the wall less than the killing of NAFTA.
What are the Americans thinking? After years of political entrenchment and impasse in Washington, D.C., Americans were ready for massive change. Since it’s virtually impossible to change the House of Representatives (which is the opposite of the intent of our founders) or the Supreme Court except very slowly, that left the executive branch and Senate with targets on their back. We were ready for radical change in Washington and got a democratic republic’s version of a revolution against the status quo.
What will be the economic fallout? Don’t worry about the downturn in the markets. That’s fleeting and will not last. The economic fundamentals are what matter. We will not return to 4 percent GDP growth because of Trump or his policies in the near term. Economic theory tells us that a shift to protectionism may create more jobs and inflation in the U.S., and we may do better since we have been net importers for many years.
On the other hand, isolationism tends to stifle innovation. If we avoid pure protectionism and achieve more “fair trade” as Trump articulates, his nationalism might be helpful; especially if combined with a heavy dose of fiscal policy to cut taxes, rebuild our infrastructure and redevelop our inner cities as he proposes.
But is that possible, given our debt-to-GDP ratio? Will the Republican Congress go along with his proposals? Retrenching from Obamacare is a wild card that will hurt the health care industry. Fossil fuel producers, especially coal, are elated. Overall, deregulation will be helpful as excessive regulation creates economic drag. However, regulation today is driven as much by our litigious society as it is by wild politicians and bureaucrats.
After Trump’s victory speech, I decided to take an afternoon walk through the very busy Chinese streets. The hotel is in a neighborhood with no stoplights, so it was especially nerve-wracking for this spoiled Coloradan who is used to leisurely walks.
As I watched to see how folks navigate the random traffic pattern I noticed a little scraggy dog wandering on its own through traffic. Lo and behold, the traffic avoided this little guy. He was a bold little Napoleon acting like President-elect Donald Trump.
I saw him cross the street several more times as I made my way to a top-notch restaurant. By the time I got there, I took the lesson well and decided to follow scraggy’s lead and celebrate boldness and optimism with wine and a great dinner. After all, as one of my Chinese acquaintances said, “at least you got to vote.”
Tom Binnings is a senior economist at Summit Economics. He can be reached at email@example.com.