The Trump Revolution is in Progress

In the years since the 2008 crisis, the financial markets have been reluctant to acknowledge that an economic depression has been under way. All manner of euphemisms have been coined to characterise the situation. The contraction in global activity and world trade between 2008 and 2010 was labelled the Great Recession. By this it was meant that the malaise was serious but did not call for radical reform of the socio-economic structure, only for measures, albeit extreme, in the traditional macro-economic sphere.  

Even now, the talk is of ‘secular stagnation’, anything to avoid the ‘d-word’, anything to divert attention from the fundamental sickness that is threatening liberal democracy (from which a few are nevertheless profiting).  How, indeed, could the economy be in a state of depression? Where are the soup kitchens and wandering hobos inextricably linked with depression in the popular imagination? Well, there are food banks and the movement of labour nowadays knows no national frontiers, as migrants wend their ways across continents.  We should never insist that history repeat itself exactly.

The surprise in markets at Mr Trump’s election victory suggests investors generally have similarly failed to recognise that a revolution is in progress. Perhaps they associate revolutions with tumbrils and severed heads, and there have been none of those yet. But there must surely have been a significant break with past certitudes when a train of events leads to someone with Mr Trump’s unusual credentials to the threshold of the White House.  

How Mr Trump will exploit his election victory is the immediate question pressing on markets

Popular anxiety at what, after 2008, has been widely perceived as the injustice of the global economic and financial order is this year bubbling over. This was also evident in the Brexit vote, which for many reflected deep disenchantment with the way the socio-economic system was, at least as they perceived it, working against their interests.

Maybe the real surprise is that voters have been willing to give the powers that be as much as eight years to right the wrongs that came to light in 2008. They have since seen the perpetrators of pre-crisis excesses go unpunished. The beneficiaries have kept their gains, while fresh excess has flourished under a cloak of regulatory reform. It may well seem that life in the financial markets can resume its even tenor.  But the world has changed.

How Mr Trump will exploit his election victory is the immediate question pressing on markets. It is hard to picture a billionaire as a true champion of the working poor, as Mr Trump presented himself during the election campaign.  

there is nothing like success to attract support

However, there are historical instances that show it would not be a psychological impossibility. In Ancient Rome, the well-connected Tiberius Gracchus paid with his life while starting a process that led to substantial amelioration of the lot of the common man.   Closer to our times, Francisco Madero, who came from one of his country’s wealthiest families, became President of Mexico in 1910, having never previously held public office, and inaugurated extensive land redistribution to the poor. He, too, was eventually assassinated.

Mr Trump might draw a lesson from these examples and, from a sense of self-preservation, shy away from radical action but we should not assume, without evidence, that his concern for the US working class is insincere. The problem in forecasting his actions is that he has yet to demonstrate how clear an understanding he has of the challenges that he will now face. Furthermore, there have been few pointers as to who his advisers will be.

While many of the familiar names have kept their distance from his campaign, there is nothing like success to attract support. It will be worth noting between now and 20 January, when Mr Trump is due to assume office, who will join the flock around his camp. That could have an important bearing on the measures that a Trump Administration will eventually try to implement.

More about the author

About the author

Stephen’s career spanning five decades has made him one of the most respected and unique voices in the City of London. Disclaimer regularly publishes a selection of his elegant and thoughtful essays on the global economy, which he has been writing regularly since he founded Fifth Horseman Publications in the late 1980s. As well as an economist, Stephen serves as Treasurer of the Forum for European Philosophy and was elected to the Royal Institute of Philosophy.

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