Jul 30, 2017

War, trade or inequality?

Lazaro Gamio / Axios

Eight months after Donald Trump's shock election, economists and other social scientists remain at odds on his rise and that of right-wing populism in the west more generally.

So we have combed through recent papers on the political wave. Three of the most interesting ideas:

  • Harvard economist Dani Rodrik: we are watching the predictable result of more relaxed international trade and the rise of financial globalization.
  • Boston University's Douglas Kriner and Francis Shen of the University of Minnesota: if just three states had suffered fewer casualties in Iraq and Afghanistan, Hillary Clinton might today be president.
  • And James Montier, an asset allocation team member for GMO, the investment manager: crippling inequality explains the anti-establishment revolt.

Rodrik and history: the anti-establishment wave, he writes in a new draft paper, "has been on the rise for at least a decade ... and was perfectly predictable." He writes:

  • Populist movements everywhere are the result of an "advanced stage of globalization," when international trade becomes highly integrated.
  • An example: at the end of the 19th century, multiple countries cut trade barriers; allowed capital, through the gold standard, to move freely across borders; and permitted relatively free immigration.
  • In the U.S., this period culminated in the impactful presidential campaigns of populist William Jennings Bryan, who denounced big banks, monopoly power, and the gold standard, and, later, legal alcohol and the teaching of evolution in schools
  • Rodrik's prescriptions: restrict foreign investment, protect sensitive industries, and enact a more robust safety net to blunt the effects of global competition on workers.

Kriner, Shen and the effects of war: Deep dissatisfaction with establishment political figures is especially prevalent among communities that have suffered a disproportionate share of the casualties from a decade and a half of war in Iraq and Afghanistan. They write:

  • A pillar of Trump's presidential campaign was an indictment of both Republican and Democratic foreign policy, specifically the invasion of Iraq, which he called a colossal blunder and a waste of money that could have been spent on domestic problems.
  • There is a link between military casualties and support for Trump. "Even controlling ... for many other alternative explanations, we find that there is a significant and meaningful relationship between a community's rate of military sacrifice and its support for Trump."
  • "If three states key to Trump's victory—Pennsylvania, Michigan, and Wisconsin—had suffered even a modestly lower casualty rate, all three could have flipped from red to blue and sent Hillary Clinton to the White House."

Montier and economic inequality: The global economy is a period of "secular stagnation" — widespread slow economic growth, low inflation, and a global middle class with little increase in spending power. He writes:

  • Politicians seeking to avoid tough political fights over fiscal policy have instead relied too heavily on central banks, like the Federal Reserve.
  • Governments should target specific, low unemployment and inflation rates, and offer a jobs guarantee until that target is hit, singling out high-priority work like caring for the elderly.
  • The rationale: "The government offers a fixed wage. ... This wage acts as the de facto minimum wage, below which no labor will be forthcoming to private sector employers. When unemployment is high, workers will flow into the government scheme, and when the economy starts to grow, private employers 'hire off the top' of the scheme by offering a [higher] wage."

Thought bubble: The Trump election and the success of other populist movements in Europe have emboldened establishment economists like Rodrik to reassess the costs and benefits of globalization, and led respected City-of-London vets like Montier to advocate radical policy changes.

Go deeper

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 2 p.m. ET: 5,453,784 — Total deaths: 345,886 — Total recoveries — 2,191,310Map.
  2. U.S.: Total confirmed cases as of 2 p.m. ET: 1,651,254 — Total deaths: 97,850 — Total recoveries: 366,736 — Total tested: 14,163,915Map.
  3. World: Top Boris Johnson aide defends himself after allegations he broke U.K. lockdown — WHO suspends trial of hydroxychloroquine over safety concerns.
  4. 2020: Trump threatens to move Republican convention from North Carolina — Joe Biden makes first public appearance in two months.
  5. Public health: Officials are urging Americans to wear masks over Memorial Day.
  6. Economy: White House economic adviser Kevin Hassett says it's possible the unemployment rate could still be in double digits by November's election — Charities refocus their efforts to fill gaps left by government.
  7. What should I do? Hydroxychloroquine questions answeredTraveling, asthma, dishes, disinfectants and being contagiousMasks, lending books and self-isolatingExercise, laundry, what counts as soap — Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingHow to minimize your risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it, the right mask to wear.

Subscribe to Mike Allen's Axios AM to follow our coronavirus coverage each morning from your inbox.

Updated 5 mins ago - Politics & Policy

Joe Biden makes first public appearance in over two months

Photo: Oliver Douliery/AFP via Getty Images

Former Vice President Joe Biden made his first in-person appearance in over two months on Monday to honor Memorial Day by laying a wreath at a Delaware veterans park, AP reports.

Why it matters: Biden, the Democratic Party's presumptive nominee, has taken the unprecedented step of campaigning from his home during the coronavirus pandemic, ever since canceling a rally in Cleveland on March 10.

WHO temporarily suspends trial of hydroxychloroquine over safety concerns

Photo: Fabrice Coffrini/AFP via Getty Images

The World Health Organization is temporarily pausing tests of the anti-malarial drug hydroxychloroquine as a coronavirus treatment in order to review safety concerns, the agency's director-general Tedros Adhanom Ghebreyesu said Monday.

Why it matters: The decision comes after a retrospective review published in The Lancet found that coronavirus patients who took hydroxychloroquine or its related drug chloroquine were more likely to die or develop an irregular heart rhythm that can lead to sudden cardiac death, compared to those who did nothing.