Dr Ashwani Mahajan
In a very interesting contest between Democrat candidate Hillary Clinton and Republican candidate Donald Trump, Donald Trump has turned out to be a winner and is President elect now. Though the world watches US presidential elections, held every four years, with curiosity; however, due to the entry of Donald Trump in the fray, this interest increased manifold. Republican candidate, Donald Trump, was in news (and also in controversy), due to his statements against immigrants and Muslims. Some people believe that victory of Donald Trump is due to these statements only. It is true that non-economic issues raised by Donald Trump, continued to be a topic of hot discussions all over the world, before election. However, we must understand that US presidential election was also being fought on number of important economic issues. The long-whammy of recession in the United States, and continuous threat of another spell of economic crisis; and policy issues arising out of the same, definitely had an impact on the election results. These issues included globalisation, USA’s failed economic model, USA’s Chinese policy, failure of Federal Reserve, unemployment and role of technology therein, had been some of the important economic issues impacting the mindset of US voters.
In the last 30 years US leadership has been advocating a development model, in which countries (especially from the third world) from other parts of the globe were forced to accept free trade under GATT agreements. Firstly, in Uruguay round negotiation in GATT and later on WTO platform, US played a very aggressive role in name of globalisation. It is an open secret that US companies lobbied for adoption of this model. US economists also favoured this model intensely. World Bank, IMF etc. (those who are under great influence from US) also made all out efforts to inflict US Government’s policies on developing countries. USA companies started dominating globally, thanks USA’s domination. This led to increased profits of USA’s companies and strengthening of US economy.
Failure of American Model
Severe economic crisis which started in 2007 began shaking the very foundations of the US model. Renowned financial institutions like Lehman Brothers collapsed, thousands of US bank faced failure. ‘Sub-prime crisis’ started demolishing the US financial structures. Real estate bubble busted, employment and incomes started declining, the stock market came to the grinding halt; and pension funds eroded heavily. It seemed difficult to save the US economy. The US government flooded bailout packages of nearly 3 trillion dollars, and that’s how various financial institutions, big corporate and therefore the economy could be rescued.
For some time, the US administration had been trying to prove that unemployment has started receding and the economy has moved out of recession. However, Donald Trump argued, perhaps rightly so, that over the years the US policies have failed to give direction to the economy.
Failing China Policy
Donald Trump’s biggest attack was on the failed China policy of the U.S. government so far. In White House Summit 2000, former President Clinton had said that increasing trade with China will open up their markets to US goods and services. Hillary Clinton (as Secretary to the State in Obama administration) had strongly advocated ‘Pacific Rim’ trade agreement. However, later on she also started opposing the same.
It is notable that Donald Trump registered victory in those counties, which were most affected by Chinese imports. His opponents argued that trade with China has done more good than the bad to US economy. According to them China is important for making cheap goods available. Policy makers used to cite the examples of gains of trade with Japan and Mexico. However, now it is amply clear that due to influx of cheap Chinese goods into US, employment is significantly reduced. According to a recent research, between 1999 and 2011, 2.4 million jobs were lost due to the Chinese imports.
Role of Technology
United States of America has always been proud of its technological development. But the American public has been upset today because of the fallouts of technological advances. Erik Brynjolfsson, from Massachusetts Institute of Technology (MIT), US’s prestigious institute, who had been supporter of computerisation, arguing that it would increase employment opportunities, is forced to concede that technology has actually reduced employment. Today, he is forced to acknowledge that the computer revolution has actually swallowed jobs in US.
Fast track growth of capitalism, with Technological advancement, had a direct impact on the distribution of income. The top 20 percent of households in USA earned 44.3 percent of income in 1990, which has increased to 48.9 percent now. In 2000, the share of wages and salaries in GDP was 66 per cent, which is only 61 per cent now. During Republican presidential debate, 91 percent of Sander’s voters and 61 Donald Trump’s voters believed that the economic policies were being made keeping in mind the interests of rich people and therefore, disparities are on rise.
US voters found Hillary Clinton has been standing with big corporate. Donald Trump attributed economic crisis of USA to the wrong economic policies of the previous government. People believed and had accepted that Trump as president will make efforts to increase expenditure on social welfare and social services and would offer tax concessions.
What would be the Trump’s economic policies, only time will tell? However, it seems that as per his election policies, Donald Trump’s move towards Americanisation against globalisation. It is possible that USA’s China policy would undergo a major change. He is expected to make special efforts for creation of employment opportunities. Tax concessions for middle class are expected. Although USA’s companies had favoured Hillary Clinton fervently, Trump’s future policy towards USA multinational companies will be known only with the passage of time.
(The author is Associate Professor, PGDAV College, University of Delhi)
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