This assessment, shared by many analysts, is best articulated by conservative columnist David Brooks.
Approval ratings for Trump’s promised policies exceed the proportion of people who voted for him.
Most Americans support strict action against illegal aliens, raising import tariffs, curbing immigration, cutting back support for Nato allies and reducing the size of government.
These actions are on the cards.
Whether the public also supports other far-fetched ideas like making Canada the 51st state, taking over Greenland and Panama, or renaming the Gulf of Mexico remains to be seen.
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These ideas are only talk as of now, and unlikely to be followed through.
But the action on immigration, protective tariffs and reducing military aid for countries like Germany, Canada and Japan seem imminent.
It would mark a break in a scenario which has existed for four decades.
America has been the bastion of free-market capitalism and a champion of free trade.
It is turning to protectionism and other forms of state intervention.
It will pick winners and give fiscal support to domestic industries.
In 1989, the British economist John Williamson coined the phrase ‘Washington Consensus.’ It stood for a set of policies that became a template for developed countries and then emerging economies pursuing reforms, including India after 1991.
The Berlin Wall fell and Soviet Union split up only after that phrase.
It is shorthand for unrestricted free-market policies and minimal government intervention.
Its prescription was low fiscal deficits, tax rates and import tariffs; removing controls on foreign exchange and investment; deregulating banking and interest rates; reducing state ownership of businesses; and privatizing public sector companies.
Many of Trump’s proposed policies are big deviations, if not U-turns on these principles.
Punitively high import tariffs are the direct opposite of the dogma.
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Under the slogan of “Make America Great Again,” his government is willing to support American firms with subsidies to help them compete against the Chinese.
Besides this, Trump and his supporters want to go against Big Tech companies, threatening them with antitrust action, even split-ups.
Similar sentiment has been expressed against large financial institutions as well.
Summing up protectionism, winner-picking, antitrust threats, tariffs, etc., a former Republican Senator said it amounts to an “attack on economic freedom and free enterprise” and that it was surprising that even conventionally pro-free-market Republican party members seem to support these measures.
Is this the end of the Washington Consensus? It very much seems so.
To be fair, cracks began to be seen 20 years ago.
Thanks to the Consensus, the International Monetary Fund was about to make free capital account convertibility a prerequisite for all charter members, just before the Lehman crash of 2008.
But the global financial crisis, followed by a sovereign debt crisis in Europe, put paid to any further mindless free-market liberalization, especially in the financial sector.
Rising youth unemployment, increasing income and wealth inequality and divergences in wages and profit growth put a serious question mark against the axioms of the Washington Consensus.
Brexit and Trump’s 2016 win offered more evidence of cracks.
By 2004, the phrase ‘Beijing Consensus’ had been coined for policies of China’s economic development model.
It emphasized sovereignty and independence, plus calibrated and gradual reform, rather than neo-liberal shock therapy, and experiments rather than ideologically driven policies.
It also meant a big government role in promoting development, peace and stability.
Sceptical of Beijing’s overarching control over its economy, economist Larry Summers suggested a ‘Mumbai Consensus’ as a better way for the mid-21st century.
He said it was neither dictated by the mindless laissez faire capitalism of Washington, nor the mercantilist export-led growth fixation of Beijing, but was a people-centric model in a robust democracy.
Be that as it may, Trump is charting a new course for America’s trajectory that departs from the Washington Consensus.
Earlier, apart from championing free market policies, the US was ready to be the “spender of last resort” and ensure the security of global trade routes, be it via the Suez Canal, Persian Gulf, East China Sea or the Panama Canal.
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By one estimate, the US has spent over $7 trillion on the safety of West Asian trade routes alone.
The US also had a strong US military presence in some Nato-ally countries, even as prosperous ones did not even spend 2% of their GDP on defence.
America has also been the world’s largest absorber of immigrants, legal or illegal, and took an indulgent view before the rise of Donald Trump.
All this global commitment will be ruthlessly re-examined during Trump 2.0, as America turns more isolationist.
Never mind that in the post-war period, the US earned handsome dividends from the dollar’s hegemony, seigniorage income, access to world markets and resources, and as a magnet for the world’s entrepreneurial, science, engineering and arts talent.
The term of the 47th US President is unprecedented in many ways.
He is the first former and first incoming president who has been convicted of felony.
America’s people and democracy have eclipsed concepts of legality not just in allowing, but welcoming him to its top office. The world order is set to be rejigged.
The author is a Pune-based economist.
This post was originally published on here
