Larry Elliott writes: Same story. Different country. Much, much bigger implications. That’s the economic message from Donald Trump’s victory in the year of shocks. By comparison, Brexit was a sideshow.
If 1989 was the year that marked the beginning of the global age, 2016 has been the year when the basic tenets of globalisation have been challenged – first in the UK and now in the US. The wall came down in Berlin on a November night 27 years ago. The question now is whether they start going up again.
It’s not that there have not been beneficiaries from globalisation. The past quarter of a century has seen the development of a massive new middle class that has done well out of trade and the free movement of capital.
But that middle class has been in Shanghai and Mumbai. Working people in the north of England and the rust belt of America think they have had a raw deal from an economic system that has favoured the well educated and the better off. Just like Brexit, Trump’s victory is a rejection of the status quo – of multinational companies that don’t pay their taxes, of trade deals weighted in favour of the boardroom rather than the workers on the shop floor, of year after year of squeezed living standards, of rising inequality, of being ignored and patronised.
It is, of course, ironic that Americans have chosen a billionaire who doesn’t appear to have paid much tax for the past couple of decades to be the next occupant of the White House, but in this race Hillary Clinton was the candidate of the establishment – the choice of Goldman Sachs and the Washington elite. Trump marketed himself as the outsider.
So what are the implications of his victory? Financial markets seemed reassured by the president elect’s victory speech and the hope that Trump might not be as bad as feared meant the initial reaction on stock markets and on the foreign exchanges was muted. Perhaps unsurprisingly, given that Trump has threatened to build a wall across the Rio Grande and to tear up the North American Free Trade Agreement (Nafta), the biggest early casualty was the Mexican peso.
There are though potentially far-reaching medium and long-term implications of a Trump victory. [Continue reading…]