By Anjan Roy
As president elect Donald Trump is edging towards taking over powers in America on January 20 next year, the country is lurching towards becoming a typical case of a plutocracy.
Money bags, as opposed to public spirited men and women who have devoted a life time in public affairs, are coming to power in the federal government. Insiders in the Trump camp are describing gleefully the scenes at Donald Trump’s golf club, Mar a Lago, thronged with hopefuls seeking to grab powerful government and policy making positions.
Donald Trump himself is a billionaire businessman having property interests in America and the world. Donald Trump’s company has developed several high end properties in multiple cities in India as well. He is a professedly extrovert billionaire at that and his private jet for personal transportation is in itself an object of admiration and envy among even the richest of the rich.
Trumping them all is the presence of one man — Elon Mask— owner of among other businesses, Tesla motor car company, who was a diehard Trump supporter in his election campaigning days. Since then, Elon Musk has become one of the insiders in the Trump set up, often seen seated at dinners with Trump at the highly sought after patio of Trump’s club.
The proximity is now so deep that Trump was seen holding calls with world leaders, with Elon Musk, by his side and sometimes Musk has been handed over the telephone in conversations with world leaders. Musk was for example on the line in course of Trump’s conversations with the president of Ukraine, Volodymyr Zelensky.
The presence of Musk aside, American economic policy is also seen lurching towards a 19th centre type free enterprise and buccaneering capitalism. That means least interference from government in the functioning of the private sector businesses and whittling down of the size of the government. While there are many social implications of this policy —like scrapping aided heath care system— this would be giving economic right to those who have economic might.
As in the 19th century, the American businessman, famously described as the “Robber Barons” almost always had their ways in determining government attitude towards control and directions and they got away with transgressions and would barge in with outright force to get their way right.
America already has its share of the super rich of the modern world. But with Trump’s support and policy push, there will be twenty-first century editions of the Vanderbilt, Rockefeller, Rothschild, and so on.
In course of his election campaign, Trump has put forward his economic policy components which resemble classical capitalist state. Least regulation and withdrawal of government from control of the economy or government presence in economic activities. But there are critical differences between now and the nineteenth century which can create policy conundrums and contradictions. The critical difference being the volume and extent of fiscal deficit of the American government.
Trump is proposing minimal taxes on businesses, which would surely be welcomed by the private businesses. But that would certainly have large implications for government’s financial situation.
A substantial and meaningful tax cuts, coupled with a failure to immediately slash government expenses and public debt, could result in a situation in which the administration would be at loggerheads with the central bank, the US Federal Reserve bank. The point of first friction could be over interest rate policy.
The obvious spark could be a demand from the administration to cut interest rates which the Federal Reserve could, in its own judgement under a very conservative central banker, Jerome Powell, refuse to comply. Already Trump’s campaigns had indicated a demand for a interest cut.
However, given the inflation trends as well as the continuing demands for funding ,the federal government could in fact point towards a rising interest regime. It would be a difficult choice for the government as well as the central bank. In an extreme situation, the administration might bay for the central banker’s blood and throw him out.
As such, the US economy is already heated up. Employment and growth had continued to remain robust despite contractionary policies of the US Fed for fighting inflation. The economy has recovered smartly from the COVID days and is poised for strongest performance amongst the developed ones. To raise the economy to further hyped up levels could become counter-productive.
Professional economists and forecasters are apprehensive that Donald Trump would surely introduce a deep recession in the American economy with his policies of further ramping the US economy to a higher level of activity to push up employment and growth.
As such, American economy is heated up and further pumping of an already heated up situation could result in catastrophe. The stock markets are for example keeping their fingers crossed about what Trump could mean for the US economy in the medium to long term. These reactions are paring the initial hyperactivity, and expectations.
Besides, prominent billionaires who had teamed up with Trump, could drive policies for their personal gains. These could mean America turning into a cosy world of crony capitalism. This generally leads to a crash in the medium to long term and informed quarters in America expect the nation’s economy to get into a full-blown recession in one and a half to two years.
China might welcome a weakening US economy as part of its of its overall policy. But this could mean bad news for the rest of the world. A volatile and failing US economy should usher in financial market upheaval across the globe and the emerging and the weaker economies would suffer most. So gird up for a possible storm sometimes within two years. (IPA Service)