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The Background of Trumpism and its Main Economic Effects

Paul Welfens

No disbei288, EIIW Discussion paper from Universitätsbibliothek Wuppertal, University Library

Abstract: This book provides an innovative analysis of structural populism in the US, President Trump's economic policy approach and the international economic position of the US in terms of effective time of life income compared to France and Germany (or Western Europe). In addition, the study critically examines the US health insurance and broader health care system separately from a transatlantic comparative perspective; it also looks at the Singaporean health insurance system as a basic reference. While Trump suffered a fairly narrow defeat in the 2020 presidential election, the issue of structural populism in the US will remain a challenge for many years to come. I am very grateful to be able to publish Global Trump in 2019 in collaboration with Palgrave Macmillan, London - and with the support of leading American economists and economic historians (David Audretsch, Barry Eichengreen ), Jeffrey Sachs, and Richard Tilly; I presented the book at Georgetown University in Washington, D.C., and at the University of California, Berkeley, in February 2020 (a recording of my talk in California is available on YouTube at .com/watch?v=92TzUcljceg). The German version of the book was subsequently published by Springer in October 2020. the publication of key chapters of the book in Chinese in 2020 was made possible thanks to the great efforts and technical support of Ms. Tian Xiong of the European Institute for International Economic Relations (EIIW)/University of Wuppertal. The book presents many new insights about the US post-2016. Of course, part of the analysis also explains how the previous decades have been a step-by-step process towards the historical turning point of 2016, marked by the "Brexit" of Western Europe and the election of Donald Trump as the fifth populist president in the history of the United States. In the November 2016 election, Trump's surprise victory made him the 45th President of the United States. At the heart of his populist approach is an expansionary trade policy aimed primarily at China, yet his fiscal policy is partially contradictory: a high deficit-national income ratio during an economic upturn and a tax reform that has somewhat reinforced income inequality, so that one of the key structural problems in the US is further exacerbated. What are the key findings of this study? Populism in the US is largely linked to the rapid expansion of economic inequality, a process that has brought about a decline in the income share of low-income earners from 21% in 1981 to 13% in 2015 (in Western Europe, the respective income share declined only from 22% to 20%). In the survey results, a majority of Americans feel that these inequalities are indeed unfair, but at the same time a relative majority expect large US companies, not the government, to finally correct them. However, this is an illusory perception in an equity economy, so widespread voter frustration will remain high on the US political agenda, and international and technology-driven inequalities will be further exacerbated in the future. Meanwhile, the US spends 0.04% of national income on government support for retraining, compared to 0.2% in Switzerland, 0.25% in Germany and 0.6% in Denmark. Meanwhile, the Council of Economic Advisers claimed in a sceptical 2016 study that the US has a lead in per capita consumption relative to the Scandinavian countries, a conclusion that does not really exist if one considers not just a particular year, but lifetime effective income and lifetime effective consumption separately. Considering a comparison with Germany and France, this study shows that lifetime income is the same in both countries, in fact the same as in the United States. In addition, Western Europe has a lower infant mortality rate and a higher life expectancy than the United States. The fact that the US has a weaker health insurance system than either the EU countries or Singapore, while actually spending 1/3 more on health - relative to national income - than Germany and France, while performing exceptionally poorly on a range of key health indicators mentioned above, is inexplicable. Moreover, Trump's rather weak policy on the new crown epidemic certainly does not match what one would expect from a Western superpower. 2020's world recession due to the new crown is the first international crisis without clear US leadership; here, the new Biden administration in the US will bring about significant changes and renewed US support for the EU should be expected. In contrast to the Trump administration, the Biden administration will be more professional and supportive of multilateralism. Meanwhile, a populist equivalent of the Trump affair in the US is taking place in the UK, where Prime Minister Boris Johnson's government seems to be sparing no effort to try to disprove the famous Adam Smith quote that appears on every £20 note, that more trade brings greater economic prosperity. The governments of Cameron, May and Johnson have all strangely contradicted themselves (see my 2017 book The Accidental BREXIT (London: Palgrave Macmillan) for more on this). With regard to the economic and political relationship between the US, the EU and China at the beginning of the 21st century, we should not expect such cooperation to always be smooth sailing, but the potential for increased cooperation for mutual economic and ecological benefits is enormous. Such a partnership could not only be more fruitful, but could also benefit all parties involved in many ways, including trade and foreign direct investment, as well as scientific cooperation. However, there is also a need for extensive cooperation on climate change policy, and the EU's Emissions Trading System (ETS), launched in 2005 and covering CO2 emissions from industry and energy, has already played a leading role. California has copied this approach and upgraded it in 2015, extending the coverage of its ETS to more than 80% of CO2 emissions. Two Japanese prefectures, and South Korea, like China, adopted an ETS for the energy sector in 2020.Promoting a network of ETSs in the G20 countries, followed by integrating national ETSs into a global CO2 certificate trading system, would be an effective way for the world economy to achieve climate neutrality by around 2050. During 25 years of research on international economic relations, (un)integration, innovation, information and communication technologies, structural change, growth and sustainability, the European Institute of International Economic Relations has also served as an interface between top researchers, policy makers and the public in many countries and regions of the world economy. We value joint and comparative research, public debate on appropriate policy reforms, and the exchange of young talent. Researchers who have participated in the EIIW/University of Wuppertal exchange have been warmly received, including further research cooperation with the Schumpeter School of Business and Economics, while our researchers on foreign assignment have also benefited from the cooperation. The new Biden administration has only a few years to adopt the US innovation policy reform agenda and the EU, while encouraging the US, should adopt its own reform project on the one hand and focus on exporting the social market economy model to the world on the other. Of course, the West should also learn from Asian countries and from the economic development of +other regions. China is, of course, one of the key policy players in Asia and the world economy. I am grateful that some of my books and other publications have been translated into many foreign languages, both Chinese and Japanese; I have also had many professional exchanges with Chinese colleagues, especially economists from the Chinese Academy of Sciences in Beijing and Shanghai Jiao Tong University. Through these core chapters in my book Global Trump, I can provide an alternative contribution to the discussion of international economics and political economy in China and beyond. I hope that my analysis will contribute to fruitful international discussions and useful policy reforms in many countries.

Pages: 85 Pages
Date: 2020-12
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