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Friday, 11 November 2016

Will Trump learn history's lessons?


Whenever making statements at the hustings Presidential candidates often make political promises that remain unfulfilled after being elected. Hopefully, we can expect the same from Donald Trump in certain arenas, provided his advisers' words are heeded, and where they must be heeded most of all is in the field of economics. It is here that he will stand or fall in any post Trump presidency assessment and it is here, if all his pre and  post election promises are carried out, the greatest dangers lurk for all Americans and the world beyond.

Not all of Trump's pledges are unsound. The promise to shore up America's parlous, crumbling infrastructure will go down well with job-strapped voters. His economic policies with a foreign element to them, however, leave much to be desired, and could even lead to unrest at home. Take, for example, his promise to slap a 45% tariff on Chinese imports as part of a home jobs protection move. Trump should remember that according to the US Treasury the largest foreign holder of US debt is China, which owns more than $1.24 trillion in bills, notes and bonds, or about 30% of the over $4 trillion in Treasury bills, etc, held by foreign countries. In total, China owns about 7.2% of publicly- held US debt. If China stops buying America's IOUs then interest rates could rise, with knock-on effects for inflation.

China's trade with America over the last 20 years or so has been of enormous benefit to both countries, especially in helping to keep America's inflation down. Slapping huge tariff rises on Chinese imports in general would be another inflationary move that would hit the poor much harder than the rich and plunge an already battered merchant marine into greater despair. China is now ostensibly switching its economy away from an export-oriented one to a home consumer-led one and so the last thing America needs is to suffer retaliatory tariff measures. Trump's tariffs would be blatantly WTO inconsistent and so China could go straight to the WTO and would easily win the right to impose retaliatory tariffs on US exports.

In the political arena, Trump has threatened to rip up America's commitment to protect smaller NATO nations. One of the figures wrongly bandied about is that of NATO's 2015 total spending of about $900 billion the US share was $650 billion, or 72%. When looked at in detail, however, the US share is only about 22%, a good example of deception by omission, so favoured by many politicians. Weakening NATO now would not be a smart move.

In the social arena Trump's promises will also have serious economic repercussions if carried out. He has promised to deport 12 million illegal immigrants, something many Californian employers will view with palpable alarm. Trump's na├»ve views over building a 1,000-mile long wall along the Mexican border are the stuff of cloud cuckoo land. There is no wall that could not be breached, as history shows from the Great Wall of China to Hadrian's wall.

Most of all, Trump should remember two things. In terms of votes cast, Clinton polled fractionally more than Trump and already we have seen the first of riotous rumblings in Oakland, perhaps partly showing dissatisfaction over the electoral college system, so in essence he does not carry the majority support. Secondly, trade is the handmaiden of prosperity and prosperity is the surest guarantor of peace. Failure to see that would be what the ancient Greeks called hubris --- the outrageous arrogance that leads to abuse of power.
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