Monday, 20 January 2020

The Failure of Trumpism

Donald Trump said, a couple of years ago, that winning a trade war would be easy. Two years on, having damaged the US economy through the imposition of high tariffs on imported goods, primarily aimed at China, he has just lost such a trade war. As the US enters an election year, with Trump's popularity already below the level that all previous Presidents have required to get re-elected, the damage that his trade war is doing to the economy, and to his core voters, means that he had to fold. Trump's tariffs, and the inevitable retaliation to them, not only damaged US farmers, but also US old manufacturing industry, in the rust belt, where Trump managed to get the small majorities required in 2016, to give him the votes in the electoral college. Trump has not, and could not, bring back US jobs in coal mining, or steel production. Those industries continue to decline. In the first phase of his trade deal with China, he has achieved not one single objective that he set out at the start of his trade war. 

That, of course, is a repetition of what has happened with his negotiations with North Korea. Trump tells us that he is the universe's best ever negotiator, but the truth of just how bad a negotiator he is is shown by the abject failure of his talks with North Korea. The underlying principle of Trump's negotiating strategy is “No deal is better than a bad deal.” In other words, its better to walk away from talks rather than to agree a deal that favours your opponent rather than you. That is all well and good if you are the more powerful party in the talks. Employers can always use that approach in talks with workers, because they hold all the cards. Workers must work to live; pressure is always put on striking workers, by the media, to go back to work; employers can always, if required, sack all the workers and employ others. Even if the power of two parties is more or less equal, such a strategy might work, if you are a good enough negotiator to convince the other party that they have more to lose by not signing a deal. But, in the case of the US and North Korea, the US is by far the most powerful party. Yet, Trump began the talks by more or less giving the North Koreans things they have wanted, without getting anything in return. So, it has been since. Trump's goal of getting Kim to scrap his nuclear weapons disappears ever further over the horizon. In fact, North Korea has used the time since to develop even further its arsenal of ballistic missiles. 

Trump also walked out of the Paris Climate Treaty, but, again, the consequence has been detrimental for the US. Across the globe, governments and countries are looking to introduce new energy technologies to replace fossil fuels. Even in the US, there is no economic benefit, even in the short-term, to pursuing the kind of fossil fuel strategy that Trump promotes. On the one hand, coal is replaced by much cleaner and cheaper shale gas, but both are being replaced by even cleaner and cheaper alternative energy supply, such as from solar and wind-power. All that Trump's policy does is to hinder the development of those technologies in the US, meaning that it will be other countries, like China, that will, increasingly, be at the forefront of their development, and who will reap the benefit, not just in terms of their own economies and environment, but also in being able to sell these technologies, to other countries. 

A similar thing can be seen in Trump's withdrawal from the Iran Nuclear Deal. Again, Trump has achieved none of his ambitions in proposing to withdraw from that deal. On the contrary, it has meant that the hard liners in Iran have been strengthened. It shows that the US cannot be trusted when it makes a deal, and, at the same time, if the mullahs did not think having a nuclear weapon was important before, they will certainly think so now, as they see the way North Korea's possession of such weapons has deterred the US from the kind of military intervention it has undertaken in the Middle East. The economic sanctions applied by the US are crippling the Iranian economy, but even that is likely to backfire on the US. A severely weakened Iran is likely to be more amenable to doing a deal with China that greatly benefits the latter, but which will save Iran from going under. 

China needs large amounts of oil, and will need more as its economy expands further. It already gets some of that oil from Iran. The huge Chinese oil companies like CNOOC, already themselves facing restrictions from the US, will be well placed to make investments in Iran. China can buy very cheap Iranian oil, and by absorbing it into its own global production, will also be able to sell into the global spot market, making it almost impossible for the US to impose sanctions on it. But, China, as it has done in Latin America and in Africa, is also very good at doing these bilateral deals in which it invests in infrastructure, and manufacturing, in exchange for raw materials. By significantly increasing its presence in Iran, China gives itself a strategic foothold in the Gulf. Given Iran's strategic alliances in the Shia Crescent, up to the Mediterranean, China would, also, overnight, give itself a strategic presence in that whole region, as the US is pushed out of it. 

The real basis of Trumpism resides in its populism. Populism does not rest on actually pursuing actions that are popular, but on saying things that are popular. Populists, of course, do pursue actions that have been committed to as part of populist rhetoric, but in almost every case, such actions do not have the effects that those that proposed them, or those that fell for them, wanted. So, Trump, for example, said he would impose sanctions on China. Some of those that voted for him naively believed that such action would be in their interest. They were wrong. Trump's tariffs on Chinese steel and aluminium, simply increased the US price of such metals, which increased the costs of US manufacturers who use those metals. That meant that their prices rose, making them less competitive, and, by raising their costs, it also reduced their rate of profit. But, it also provoked an inevitable retaliation, not just from China, but from the EU and others, against whom Trump had imposed tariffs. That meant that US farmers saw their sales to China plummet. Trump had to pay them billions in compensation. 

The nature of populism, however, is that it must always deny the harmful effects of the policies it has pursued. It must always loudly proclaim that the populist policy is working marvellously.  Trump is the epitome of that, as an inveterate liar. When one set of previous lies are exposed, he simply doubles down on them, throwing out a series of further lies, along with attempting to divert attention on to some other topic. But, such a strategy sows the seeds of its own destruction. You can only get people to marvel at the Emperor's new clothes for so long, before someone points out he's naked, and then everyone laughs. Or, as in these instances of political leaders, it usually ends more in tears. Trump has had to capitulate to China, even to get this initial trade deal agreed. 

Trumpism, however, is also the feature of Boris Johnson and his government. Theresa May spoke the words that “No deal is better than a bad deal”, but, sensibly, she never believed it. When it came down to it, she had to capitulate to the EU, and had to extend Article 50. Boris Johnson, is not a moron like Trump. Johnson also knows that no deal would be catastrophic for Britain. That is why he too capitulated to the EU. He too had to extend Article 50 rather than “die in a ditch”. Had he not been saved by the election, he would almost certainly have had to extend it again, at the end of January. But, like Trump, Johnson cannot visibly row back on the populist commitments he has given. The truth about his deal with the EU, is that he too capitulated. He did not reopen the Withdrawal Agreement, or get the Irish Backstop removed, as he claims. What he did was to go back to the previous deal that the EU had offered to Theresa May, a worse deal than that she eventually negotiated, but which, itself, was so bad that it was repeatedly voted down in parliament by large margins. Johnson's capitulation simply sells out the DUP, and puts a border down the Irish Sea. It actually means that Northern Ireland is economically separated from Britain and incorporated into the Irish Republic. Where economic reality leads, political reflection of that reality inevitably follows. 

But, it does not change reality. Just as Trump has had to capitulate to China, because, in the current conditions, China has more cards in its hand, so too, and even more so, will Britain have to capitulate further to the EU. In typical Trump fashion, Johnson, as with Javid, at the weekend, are ramping up the No Deal rhetoric once more. But, that louder noise is simply to cover the reality that they know that, come the end of this year, No Deal is again not a possibility. In fact, even by June, it will become apparent that No Deal is not an option. The UK will have to recognise the economic reality that it depends upon the EU. It will have to arrive at some deal that maintains the UK's trade relations with the EU at something like its current levels, and that is only possible by either remaining inside the Customs Union and Single Market, or signing some kind of treaty that ensures that Britain will remain aligned to the rules and regulations of those institutions. Johnson and his government will wave and shout and proclaim that such a BRINO represents them having “got Brexit done”, and some of those who voted for them might even believe it.

No comments: