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Growing Out of US Leadership

Donald Trump’s election as US president has been greeted around the world with justifiable bewilderment and fear. But what it should be is a spur to challenge failed ideas and move beyond reliance on America to maintain global order and ensure that global goals are met.

BEIJING – Donald Trump’s election has been greeted around the world with justifiable bewilderment and fear. His victory – following a fact-free, vicious election campaign – has trashed the brand of American democracy. But, while Trump is impulsive and occasionally vindictive – a potentially fatal mix in an already fragile world – his election should be a spur to challenge failed ideas and to move beyond excessive reliance on the United States’ inevitably imperfect global leadership.

In many policy areas, what Trump will actually do is unknowable: therein lies the risk. But in the case of economic policy, one thing is clear: fiscal policy will be loosened. The exact form of the stimulus will likely be inefficient and regressive: big tax cuts for the rich will exacerbate the inequality that helped fuel Trump’s success. And his infrastructure spending plans – based on investment tax credits – may have only limited impact.

But the direction of the policy shift – from monetary to fiscal stimulus – makes sense. Across the developed economies, the prevailing policy mix for the last six years – fiscal tightening and ultra-easy monetary conditions – has resulted in mediocre income growth but big wealth increases for the already rich. If Trump’s fiscal stimulus provokes a policy rethink elsewhere, some benefit will result.

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