Trumping Capitalism?

Donald Trump’s presidency is a symptom of an interregnum between economic orders – a period that will result in a new balance between state and market. While his administration’s economic policies are unlikely to provide the right answer, they may at least show the world what not to do.

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LONDON – Donald Trump’s inauguration as the 45th president of the United States is widely seen as the beginning of the end of the post-1945 capitalist order that became globally dominant after the Cold War’s end. But is it possible that Trumpism is actually the end of the beginning? Could Trump’s victory mark the end of a period of post-crisis confusion, when the economic model that failed in 2008 was finally recognized as irretrievably broken, and the start of a new phase of global capitalism, when a new approach to economic management gradually evolves?

If history is any guide, the near-collapse of the global financial system in 2008 was always likely to be reflected – after a lag of five years or so – in challenges to existing political institutions and prevailing economic ideology. As I have recently explained – and described in greater detail in my 2010 book Capitalism 4.0– this was the sequence of events that followed previous systemic crises of global capitalism: liberal imperialism followed the 1840s revolutions; Keynesianism followed the Great Depression of the 1930s; and Thatcher-Reagan market fundamentalism followed the Great Inflation of the 1970s. Could Trumpism – understood as a lagged response to the 2008 crisis – herald the emergence of a new capitalist regime?

This question can be divided into three parts: Can Trump’s economic policies work? Will his administration’s economic program be politically sustainable? And what impact might Trumpism have on economic thinking and attitudes to capitalism around the world?

Trickle-Down Redux

On the first of these issues, a few Project Syndicate commentators see some grounds for hope, but most are deeply pessimistic, a stance epitomized by Nobel laureate Joseph Stiglitz. “There really is no silver lining to the cloud that now hangs over the US and the world,” he argues. “The only way Trump will square his promises of higher infrastructure and defense spending with large tax cuts and deficit reduction is a heavy dose of what used to be called voodoo economics.” For Stiglitz, Trump represents a re-enactment of the Reagan era’s socially regressive trickle-down economics, but with the addition of two further lethal ingredientsa trade war with China and a loss of access to health care for millions.