LAST WEEK’S CONTRIBUTION introduced two schools of thoughts in economics: the Keynesian and Monetarist approaches which dominated economic policy making and thinking for some time.
But what were the roles of governments under these two paradigms?
The reality is that the Keynesian approach meant not just a greater role for government, but resulted, in practice, in more monies being spent in ways which benefited a wide cross-section of the country’s citizenry; not just in direct welfare benefits, but in employment, on infrastructure projects and other government spending activities.
In contrast, the “money supply” approach tended to favour investors, and often resulted in a squeeze of the most marginalised, economically.
But the single most important thing to know about the pre-1980s – the pre-neoliberalism and pre-globalisation periods – is perhaps the fact that in this post World War II to 1980 time – that is, from 1945 to around 1980, income inequality lessened; the gap between the rich and the poor narrowed, whereas it has grown obscenely in the 35-year neoliberalism period which followed.
It is against that backdrop that one can easily raise the question of what will economic policies under United States President-elect Donald Trump look like.
Clearly, if Trump keeps his campaign promises to his white working class base, then the world will see, inter alia: a halt to and renegotiation of the Trans Pacific Partnership Trade Agreement (TPP); a halt to and renegotiation, also, of the Transatlantic Trade and Investment Partnership (TTIP); an attempt (whether or not successful) to renegotiate the North American Free Trade Area (NAFTA); efforts to negotiate a higher value for the Chinese yuan against the US dollar, and/or selected increases in tariffs on some Chinese goods entering the USA; changes to American tax laws to induce the repatriation of several US factories which have gone abroad in the last several years of neoliberal globalization.
Also, changes in American tax laws to greatly reduce the incentive for large US companies and wealthy individuals to avoid US taxes (note: not evade taxes) by using financial shelters abroad, including in the Caribbean; the introduction of curbs on immigration of unskilled and semi-skilled labour; and the deportation of those with even minor encounters with American criminal law, but possibly an increase in visas for professionals, para-professionals, and skilled workers from all over, including from us in the region.
As far as Brexit is concerned, the implications for the world economy are a bit more difficult to predict with any degree of certainty because of the nature of the episode as well as the fact that it is the first time in history that a major economy like Britain has chosen to remove itself from such a complex integration apparatus like the European Union (EU).
But that said, global trade in goods and a wide range of services, the movement of people between Britain and the EU, the value of the pound sterling, tourism flows between Britain and the rest of the world, and remittances from Britain to us here in the Caribbean and Latin America could all be severely affected based on the contents of the negotiated Brexit.
As Trump’s assumption of office is married to the likely effects of Brexit on the international community, 2017 could easily be yet another year of global economic uncertainty and panic not only for us in this region but also for other countries worldwide, rich as well as poor. How will this all evolve, only time can tell.
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