Dr Ashwani Mahajan
From the very beginning of the process of USA Presidential elections, Donald Trump, now official Republican candidate, has been raising number of issues, which have implications, not only for USA, but all the countries, which have strong economic ties, including trade; and also the immigrants. 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 has increased manifold. Republican candidate Donald Trump, who has been in news (and also in controversy), due to his statements against immigrants and Muslims, is offering a huge challenge to the Democrat candidate Hillary Clinton in the elections. It is true that non-economic issues raised by Donald Trump, continue to be a topic of discussion all over the world; however, we must understand that US presidential election is 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, may definitely have an impact on the election results.
Recent result of the United Kingdom’s (UK’s) referendum to severe its relation from European Union, and thereby giving a blow to those saying that economic integration and making of a global village, is the solution to all ills, and now overwhelming response to Donald Trump on his issues of indiscriminate use of technology and free trade with China and the policy of economic integration with the rest of the world has actually shaken the confidence of supporters of globalisation, because all these developments depict the mood of the people away from economic integration, free trade, free movement of capital and enterprise.
Failure of American Model
Severe economic crisis which started in 2007, started shaking the very foundations of the US model. Renowned financial institutions like Lehman Brothers collapsed, thousands of US bank faced failures. ‘Sub-prime crisis’ started demolishing the US financial structures. Real estate bubble busted, employment and incomes began to decline, the stock market came on the grounding halt; and pension funds eroded heavily. It seemed difficult to save the 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 has been trying to prove that unemployment has started receding and the economy has moved out of recession. However, Donald Trump argues, perhaps rightly so, that over the years the US policies have failed to give direction to the economy.
Failing China Policy
Donald Trump biggest attack is 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, and now she has also started opposing the same.
It is notable that Donald Trump had an edge over his other republican opponent in 89 counties out of 100, which were most affected by Chinese imports. But he could get lead in only in one fourth of counties, which are not affected by Chinese goods. Earlier policy makers were heard saying that gains of having trade with China are much higher than the losses incurred and it was said that 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.
The Role of Technology
United States of America has always been proud of its technological development. But the American public is 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 candidature 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.
Amidst the grim economic situation, there is huge pressure that US government resorts to fiscal policy with increased government spending and tax reliefs. Donald Trump blames wrong economic policies of previous governments for today’s economic crisis. What Donald Trump’s economic policies would be, only time will tell; however, Trump seems to be successful in bringing home a point and impress upon the Americans that they had to bear the brunt of the wrong economic policies of the previous governments. Donald Trump is also successful in convincing Americans that while dealing with China, that the government has failed miserably, which has caused major loss of jobs. Government policies have been favouring a few rich and in the process poor and middle class suffered.
(The author is Associate Professor, PGDAV College, University of Delhi)
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