¿Las políticas de Trump perjudican o benefician a la Unión Europea? (Parte II) (página 9)

Of course, like Cohen and James, Sheng and Xiao acknowledge that the normal rules do not necessarily apply "in the country with the dominant global reserve currency". Moreover, they believe that "other reserve-currency countries will probably continue to allow their currencies to depreciate, in order to reflate their economies, and emerging economies will probably continue to use exchange rates to cope with capital-flow volatility". Eventually, if this continues, "the strain on the international monetary system will only intensify".

In that case, the world may find itself back to the future. Absent large capital outflows to correct unsustainable "dollar-induced imbalances", say Sheng and Xiao, the global economy may need "a new Plaza Accord – the 1985 agreement to devalue the dollar and push the Japanese yen and the Deutsche Mark sharply upward".

Bloc-ing Maneuvers

Contemplating the possibility of such an accord underscores a common theme for Project Syndicate commentators. Just as the "Brexit referendum did not cause the economic catastrophe that much of the "Remain" camp had predicted," James notes, the costs of US populism will be borne by others -not only by smaller countries, but also (and especially) by emerging economies- long before they are felt at home. As a result, Turner says, the choice for the rest of the world is clear: it must move beyond "excessive reliance on the United States" inevitably imperfect global leadership".

Indeed, as the need to minimize the costs of Trumponomics becomes increasingly imperative, many countries may have no choice but to band together in defensive regional blocs. "China may speak for all of Asia," James says, and "Europe might act together". And, while "regional integration could set the stage for sorely needed governance reforms, and thus clear a way out of the populist trap", in the worst case, the "new regionalism could fuel geopolitical animosities and reprise the tensions of the 1930s".

That risk is likely to take a back seat as the idea of regionalism gains greater sway, particularly in Asia, the world"s economically most dynamic region. As Lee Jong-Wha, a professor at Korea University, emphasizes, "intra-regional trade and investment are more important than ever" in the face of populist policies and American isolationism. "Beyond the economic benefits, integration would yield important political benefits, with an integrated Asia enjoying more influence on the international stage". But, in order to "reap those benefits, Asia must mitigate regional military and political conflicts and develop a long-term vision for regional integration".

Former Spanish foreign minister Ana Palacio thinks Europe, which has spent decades integrating, also needs a new focus on regional unity. Otherwise, as "Brexit plays out and the transatlantic partnership becomes unmoored, the EU could well unravel". Here Palacio, a staunch EU federalist, accepts that a new-model Europe will need to emerge, the most likely alternative being "that it becomes a platform on which its hegemon, Germany, can stand and lead". Reflecting on the "truism that nothing gets done in Brussels these days without the German government"s acquiescence", she notes, "the EU is already well down this road".

But perhaps no region of the world feels more anxious about a Trump presidency than Eastern Europe, given Trump"s evident rapport with Russian President Vladimir Putin. "Trump is not just an ill-tempered child playing with nuclear matches", says Slawomir Sierakowski, director of the Institute for Advanced Study in Warsaw, "he is also dangerously ambitious, and his foreign-policy proposals could unravel crucial alliances and destabilize the international order". For Poland and all of Eastern Europe, this is not so much a question of economic welfare as it is a "matter of life and death".

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The fear is that Trump will forge with Putin a "Yalta 2.0", consigning Ukraine and other parts of the former Soviet Union that gained their independence in 1991 to a Russian sphere of influence. Eventually, Sierakowski suggests, "Russian influence will mean the withdrawal of NATO from Eastern Europe", while "Western Europe may well be glad to withdraw as well, seizing an opportunity to jettison increasingly burdensome neighbors". Then, with Western influence waning, Eastern European countries will likely deepen their economic and diplomatic ties with Russia. Hungary under Prime Minister Viktor Orbán is well along in this process, and the Baltic states -where Estonia"s pro-Russian Center Party will lead a new government- may be next. When it comes to Russia, if Trump governs as he campaigned, the outlook, in Sierakowski"s view, is grim: "Those countries that have not already embraced (Putin) will have no alternative but to do so".

The Knight Arrives

Emmott, for one, has seen this before. One "lesson of Berlusconi", he says, "is that expressions of admiration for strongmen like (Putin) should be taken seriously". This is because, for both men, all politics is personal: "Narcissistic lone rangers like Berlusconi and Trump are accustomed to making personal deals, and prefer other strongmen as their interlocutors".

For the same reason, Trump, like Italy"s Il Cavaliere (as Berlusconi is known), "will probably continue to prize loyalty above all else in his administration", Emmott says. This is why his three oldest children have been "key players in his campaign and transition", and it is why "(e)ven Trump"s non-family appointments -often controversial or radical figures who would not have a place in any administration except his- reflect an emphasis on personal loyalty".

In the end, there is nothing original or unique about Trump"s populism. His massive conflicts of interest; his reliance on racism and clientelism, rather than ideological coherence, to maintain his political base; his embrace of a narrative of victimization and hostility to independent journalists (and comedians); his crude mocking and intimidation of opponents: all are familiar to electorates in Europe, Latin America, and elsewhere. What is new is that this style of politics is coming to power in the world"s largest economy and, for the last seven decades, its main guarantor of global order and stability.

That is why we must not fool ourselves about Trump, or permit efforts to normalize his administration -whether by his allies, his weakened domestic opponents, or a pliant press- to go unchallenged. As Palacio puts it, "clinging to optimism -the belief that things will end well- is pointless." Damage will be done -at home and abroad- by Trump"s election, because damage already has been done. "Instead", Palacio says, "we must find grounds for hope – the belief that things will eventually make sense". And "the only way to do that is to be honest with ourselves and take a sober look at what we can and must do to ensure the most that can be achieved".

As the US president-elect fills his administration, the direction of American policy is coming into focus. Project Syndicate contributors interpret what"s on the horizon.

Editors" Insight: a fortnightly review of the best thinking on current events and key trends.

– Trump and the End of the West? (Project Syndicate – 9/12/16)

If America"s president-elect delivers on his promises, the long-term costs -both domestic and international- are likely to outweigh any short-term gains. If he fails to deliver, the long-term costs will fall due much sooner.

"If Donald Trump"s victory in the United States" presidential election was an earthquake, then the transition period leading up to his inauguration on January 20 feels like a tsunami warning," says Spain"s former foreign minister, Ana Palacio. But the warnings have sounded the loudest across the Atlantic of late, with populists in Italy and Austria mounting fresh challenges to the stability of the European Union and its common currency.

Prime Minister Matteo Renzi"s defeat in the referendum he called to reform Italy"s creaking constitution had been anticipated, but the opposition"s margin of victory was unexpectedly large. While Renzi has submitted his resignation to Italy"s president, Sergio Mattarella, a caretaker administration is expected to be formed. That would leave the populist Five Star Movement -which led the "No" campaign in the run-up to the referendum- to wait until February 2018 to try to capitalize on its surging popularity in a general election. And time may yet prove the populists" undoing: Alexander Van der Bellen"s victory over the far-right Norbert Hofer in the re-run of Austria"s presidential election (on the same day as Renzi"s defeat) suggests that greater familiarity with the populists may dilute their appeal.

Trump"s appeal is already wearing thin, at least among more orthodox congressional Republicans, who are openly questioning his threats to impose heavy taxes on businesses that move jobs overseas, or his promise to impose tariffs on Chinese imports. And hopes that the demands of office and America"s vaunted constitutional checks and balances would prove to be a sobering influence are being tested to the limit. By refusing to place his extensive assets in a blind trust, Trump could run afoul of the US Constitution"s emoluments clause. He has deliberately undermined decades-old bipartisan policies and protocols. He continues to use social media to mislead and incite. And, most important, his cabinet appointees hold some of the most extreme positions – on national security, social welfare, education, the environment, and much else – ever to be represented in a US administration.

For Project Syndicate commentators, however, the Trump transition should not be viewed solely in terms of its domestic implications. By serving as a catalyst and booster of populism worldwide (even expressing support for the Philippines" populist president, Rodrigo Duterte, and his extrajudicial murders), Trump"s victory has initiated a period of uncertainty on a scale that the West has not witnessed since the dying days of World War II. But where there was hope then, today there is dread. Former German foreign minister Joschka Fischer is not alone in fearing the worst: "the end of what was heretofore termed the "West" has become all but certain."

Reeling from Renzi

The newest threat to the West has arisen in Italy where, once again, an ill-considered referendum has weakened the EU. Renzi"s determination to hold a plebiscite on constitutional reforms, in the face of today"s populist revolts, was perhaps an even more dubious political bet than David Cameron"s call for the Brexit referendum in the United Kingdom. Renzi"s failure, and his imminent departure from Italy"s leadership, has deprived the EU of one of its few remaining visionaries, and Italy of one the few national leaders offering a genuine reform program to bring the country out of its economic mire. As Philippe Legrain, a former economic adviser to the European Commission president, puts it: "Renzi was the pro-EU establishment"s best -and perhaps last- hope for delivering the growth-enhancing reforms needed to secure Italy"s long-term future in the eurozone."

Legrain is probably right that "[m]uddling through with a weak technocratic-led government amounts to waiting for an accident to happen." But the alternative could be worse. If the Five Star Movement, which is leading in opinion polls, comes to power, its government will hold another plebiscite – this time to take Italy out of the euro. Then again, the University of Vienna"s Philipp Ther doubts that Italy will still have the common currency when the caretaker administration"s term expires, in February 2018. "If Renzi steps down, Italy could become almost ungovernable, which will frighten financial markets," Ther argues. "This, in turn, will make it difficult for Italy to remain in the eurozone, given the already high interest rates on its public debt, which amounts to 132% of its GDP."

"The immediate problem," notes Legrain, "is Italy"s zombie banks, which are inadequately capitalized, insufficiently profitable, and saddled with bad loans." Recapitalizing them, he points out, "was already proving difficult before the referendum, and now may be impossible amid the heightened political uncertainty." As a result, preventing an Italian banking crisis -which Legrain thinks could spread, given that "many eurozone banks remain weak"- will likely depend on the EU"s willingness to allow state aid, and to help Italy access the funds to provide it.

But the rising cost of servicing Italy"s debt was already ringing alarm bells before the referendum. "Although the monetary anesthetics administered by the ECB have reduced market tensions," says Jean Pisani-Ferry of France Stratégie, "spreads between Italian and German ten-year bunds reached 200 basis points" by end-November, "a level not seen since 2014."

And Harvard"s Carmen Reinhart says that because of capital flight, Italy"s borrowing is dangerously high, as evidenced by its balance in the Target2 settlement system for the euro: "If a country has run out of reserves, its central bank automatically borrows to maintain the intraeuro peg," she explains. "Italy"s Target2 deficit is above 20% of GDP – its worst reading to date." Indeed, they could be classified as "crisis-level reserve losses."

For Hans-Werner Sinn, this holds out the prospect of a full-blown euro crisis. "The Target debt of the Southern European countries -Greece, Italy, Portugal, and Spain (GIPS)- amounted to €816.5 billion" at the end of September, he notes. "If a crash occurs and those countries leave the euro, their national central banks are likely to go bankrupt because much of their debt is denominated in euro, whereas their claims against the respective states and the banks will be converted to the new depreciating currency."

That is why Pisani-Ferry thinks that governments should start discussing how to manage the euro now, after four years of leaving the issue to the ECB. Unlike Sinn, however, he argues that "addressing the legacy problems" is not the ideal place to start. "Distributing a burden between creditors and debtors is inevitably acrimonious, because it is a purely zero-sum game," he notes. So the "seemingly realistic option of starting with immediate problems before addressing longer-term issues is only superficially attractive." Instead, "discussions should start with the features of the permanent regime to be established in the longer run."

But if the EU wishes to keep Italy in the eurozone, finding a resolution for its banks is the obvious place to start. So could Renzi"s defeat provide the spur to prod EU leaders to action?

Trump to the Rescue?

Daniel Gros, Director of the Centre for European Policy Studies, thinks a white knight may be about to arrive. "If the eurozone"s breakdown is to be avoided, Italy-indeed, the entire currency area- urgently needs an economic boost," he says, and "Trump may be just the person to deliver it." Given Trump"s "plans to subsidize infrastructure investment and increase military spending," according to Gros, "it seems likely that the US will face rapidly rising fiscal deficits and a huge short-term increase in demand." And, with "the US economy already operating at close to full capacity," he adds, "higher imports -and a stronger US dollar- will be needed to meet that demand."

Moreover, with the dollar already up significantly since Trump"s victory, "it is the peripheral countries that are likely to benefit the most," Gros continues, noting that "the impact of a euro depreciation is about three times larger in Italy than it is in Germany, because demand for Germany"s exports of specialized capital goods is not very price elastic." Thus, "rapid demand-fueled growth in the US, together with the strong dollar, could contribute to a much-needed rebalancing of the eurozone."

In America, too, financial markets seem convinced that Trump"s program is bound to deliver stronger growth. "With an incoming Republican administration hell-bent on reflating an economy already near full employment, and with promised trade restrictions driving up the price of import-competing goods, and with central-bank independence likely to come under attack, higher inflation -likely exceeding 3% at times- is a near-certainty," says Harvard"s Kenneth Rogoff. "And output growth could surprise as well, possibly reaching 4%, at least temporarily."

You don"t have to like Trump to believe he can reinvigorate the economy, Rogoff says, especially "if one believes, as I do, that the slow growth of the last eight years was mainly due to the overhang of debt and fear from the 2008 crisis." And, "[a]t the risk of hyperbole," he continues, "in many ways, Germany was as successful as America at using stimulus to lift the economy out of the Great Depression."

Indeed, by some measures, Germany did even better, as Joseph Goebbels was quick to point out in a January 1939 diatribe against US criticism of the Nazi regime following Kristallnacht, the anti-Jewish pogrom of the previous November. "It is enough to observe that although Germany is the poorest country in the world in terms of foreign currency reserves and raw materials, it has not only abolished unemployment, but has a labor shortage," Goebbels claimed. "North America, meanwhile, has between eleven and twelve million unemployed, even though it is rich in foreign currency reserves and raw materials."

Of course, unlike Hitler, Trump cannot be certain that he will get his plan through. Already, he"s been attacked even by allies like Sarah Palin, who condemned as "crony capitalism" the deal he recently struck with the air-conditioner manufacturer Carrier to keep it from moving 800 jobs to Mexico. And congressional Republicans furiously opposed plans for spending on infrastructure when they were put forward by President Barack Obama.

But Gavekal Dragonomics" Anatole Kaletsky believes that most Republicans will, eventually, fall behind their populist standard-bearer. "The Republican aversion to public spending and debt applies only when a Democrat like Obama occupies the White House," he notes. "With a Republican president, the party has always been glad to boost public spending and relax debt limits, as it was under Presidents Ronald Reagan and George W. Bush." Given this history, Kaletsky is confident that "Trump will be able to implement the Keynesian fiscal stimulus that Obama often proposed but was unable to deliver."

Mohamed A. El-Erian, Chief Economic Adviser at Allianz, agrees, and sees plenty of opportunity for Trump to steal the Democrats" clothes. "The good news is that the incoming administration can draw on measures that were formulated during Obama"s tenure, but which gained little traction because of the highly polarized and dysfunctional congressional politics that characterized most of Obama"s eight years in office." And, because these "measures address imperatives such as infrastructure investment, tax reform, and job creation," El-Erian believes, "Trump is in a position not just to help boost growth in the US, but also to make it more inclusive."

The Job Con

If Trump is to deliver for the unemployed in the Rust Belt and the many whose incomes have stagnated since the crash of 2008 -precisely the voters who backed him in the election, or, more important, did not vote for Hillary Clinton- he will need more than a kick-start to an already growing economy. He will have to ensure that they reap the benefits of growth. "Trump"s victory clearly appears to stem from a sense of economic powerlessness, or a fear of losing power, among his supporters," says the Nobel laureate economist Robert J. Shiller. "To them, his simple slogan, "Make America great again," sounds like "Make YOU great again": economic power will be given to the multitudes, without taking anything away from the already successful."

Reflecting on why supporters of liberal democracy underestimated the surge of populist sentiment in 2016, Kemal Dervis, Vice President of the Brookings Institution and a former administrator of the United Nations Development Program, says that genuine redistribution is the key. "Those who voted for Brexit or Trump did not simply fail to understand the true benefits of globalization; they lack the skills or opportunities to secure a piece of the pie." For Dervis, the key is to dispense with the liberal-democratic illusion that all solutions are "win-win." On the contrary, "[f]or economies to secure the "win" of inclusive growth, the very rich may well have to submit to a form of regulation and taxation, including international rules, that cost them substantial wealth in the long run."

But how likely is it that Trump, a wheeler-dealer proud of not paying taxes, will embrace measures that, as Dervis puts it, "compensate the losers through taxation, subsidies, and employment support"? Few would describe his cabinet appointments as champions of the poor and dispossessed. Steven Mnuchin, his proposed Treasury Secretary, is the second Goldman Sachs alumnus to join the Trump team, after Stephen Bannon, the Chief White House Strategist, better known for providing the white nationalist "alt-right" with a platform at Breitbart News, the extremist website he ran before taking over the Trump campaign.

Mnuchin is best known for his buyout of OneWest, then known as IndyMac, in the aftermath of the financial crisis. OneWest then became notorious for foreclosing on middle-class homeowners, the very sort of people who voted for Trump. Mnuchin"s nomination may yet cause Trump headaches at his nomination hearings in the Senate.

Yet Mnuchin, like other Republicans, appears to be backing away from some of Trump"s campaign proposals, which, according to the Tax Policy Center, would have redistributed more than $ 100.000 annually, on average, to the top 1% of income earners. "Any reductions we have in upper-income taxes will be offset by less deductions, so there will be no absolute tax cut for the upper class," Mnuchin says. But, whereas he promises tax cuts for middle-income earners, what these voters expect is better jobs, not lower taxes.

Likewise, Harvard"s Martin Feldstein thinks that congressional Republicans may actually force Trump to finance all of his cuts in personal income tax by limiting deductions, and not just for the rich. Moreover, he cautions about reading too much into the spending side of Trump"s supposed fiscal boost. Trump"s campaign "was not proposing that the federal government should carry out the infrastructure investment," Feldstein points out, or "calling for a Keynesian fiscal stimulus based on deficit spending." Rather, his "campaign called for a "deficit-neutral system of infrastructure tax credits" to provide incentives for private businesses to undertake projects to build roads, bridges, tunnels, airports, and so forth."

If Feldstein is right, then Trump supporters as well as the markets are in for a disappointment. But even if he is wrong, because the US is already near full employment, pump-priming the economy "implies accelerating inflation, higher interest rates, or probably some combination of the two," says Kaletsky, and that in turn could send the dollar soaring further. "Even though the dollar is already overvalued," he warns, "it could move into a self-reinforcing upward spiral, as it did in the early 1980s and late 1990s."

Trumpworld

Trump, of course, blames the Chinese for hollowing out US manufacturing, by keeping the renminbi weak. But if his program does result in a soaring dollar, a renewed flood of imports could induce him to press harder for his protectionist agenda.

Some observers -and evidently the markets as well- took Trump"s near-silence on trade matters in the weeks after the election as a positive long-term signal. In El-Erian"s words, he was backing away from "his trade-protectionist campaign pledges, such as imposing punishing tariffs on China and Mexico, dismantling the North American Free Trade Agreement (NAFTA), and rescinding America"s bilateral trade agreement with South Korea." And, though Trump "reiterated his pledge to withdraw from the Trans-Pacific Partnership, that deal had not yet been ratified, anyway." This "shift in focus," according to El-Erian, "has convinced markets that Trump may well decide not to follow through on the more growth-damaging measures he suggested during his campaign."

Indeed, in the weeks following the election, even China"s leaders had seemed relaxed about the outcome, despite Trump"s campaign vow to impose a 45% tariff on Chinese imports. The reason, says the LSE"s Keyu Jin, is that America is simply too dependent of China. "If Chinese imports were blocked, prices would rise, undermining consumption, impeding economic growth, and exacerbating inequality." Moreover, the effort would not halt the trade-induced erosion of US manufacturing employment, because "the jobs would just go to Vietnam or Bangladesh, where labor costs are even lower than in China nowadays."

Just as important is China"s role in financing America"s deficits. "China is one of the biggest purchasers of US Treasuries, and continues to finance US consumption and investment," Jin notes. Indeed, "China may even help to finance the large infrastructure projects that Trump has promised, thereby reducing pressure on the US budget."

But Trump"s recent phone call with Taiwan"s President Tsai Ing-wen, the first conversation with a Taiwanese president by a US leader since 1979, and his subsequent anti-Chinese outbursts on social media, shattered this complacency. Facing criticism from China"s leaders for taking the call from Taipei, Trump responded with the puerile grandstanding that characterized his campaign. "Did China ask us if it was OK to devalue their currency (making it hard for our companies to compete), heavily tax our products going into their country (the US doesn"t tax them) or to build a massive military complex in the middle of the South China Sea?" he retorted via Facebook. "I don"t think so!"

But while Trump"s fans swoon at his belligerent rhetoric (his Facebook post has been liked, shared, or commented upon more than 200.000 times), former Greek finance minister Yanis Varoufakis believes that Trump"s get-tough approach toward China could jeopardize his entire program. "China"s credit boom is underpinned by collateral almost as bad as that on which Bear Stearns, Lehman Brothers, and the rest were relying in 2007," Varoufakis points out. If Trump "plays hardball with China, pushing the Chinese to revalue the renminbi and employing threats of tariffs and the like, he may well end up pricking the bubble of China"s private debt – unleashing a deluge of nasty consequences that would overwhelm any domestic stimulus he introduces."

Such risks underscore a more fundamental point. As Javier Solana, a former EU High Representative, says, "The world is past the point of closed borders and unilateral solutions." There can be no turning back the clock: "We have already globalized; now we need global rules to underpin economic and financial stability, as well as peace and security."

The Walled Economy

But is globalization really irreversible? Nobel laureate Michael Spence thinks that the Trump administration"s approach to trade negotiations will reflect the "America first" rhetoric on which the president-elect campaigned. "While Trump might pursue mutually beneficial bilateral agreements," he argues, "one can expect that they will be subordinated to domestic priorities, especially distributional aims, and supported only insofar as they are consistent with these priorities."

In Spence"s view, since the Brexit vote, the writing has been on the wall. "Achieving strong inclusive national-level growth to revive a declining middle class, kick-start stagnant incomes, and curtail high youth unemployment is now taking precedence." As a result, "international arrangements governing flows of goods, capital, technology, and people" will be viewed as "appropriate only when they reinforce -or, at least, don"t undermine- progress on meeting the highest priority."

And some are not grieving over the turn away from trade deals. Harvard"s Dani Rodrik notes that in the seven decades since World War II, "more than 500 bilateral and regional trade agreements were signed -the vast majority of them since the [World Trade Organization] replaced the [General Agreement on Tariffs and Trade] in 1995" But no one should regret that "[t]he populist revolts of 2016 will almost certainly put an end to this hectic deal-making"- no one, that is, except the powerful business lobbies that such deals (particularly those concluded over the last 20 years) have favored.

"Trade policies driven by domestic political lobbying and special interests," Rodrik continues, "are beggar-thyself policies," which "reflect power asymmetries and political failures within societies." International trade agreements can contribute only in limited ways to solving such domestic political failures," which "requires improving domestic governance rather than international rules."

The Great Reversal

It is not just US policies on China and trade that Trump may upend. It is now increasingly clear that no US commitment, no matter how long established, can be taken at face value. Whether the issue is security guarantees for America"s NATO and Asian allies, a possible accommodation with Vladimir Putin"s revanchist Russia, or withdrawal from the Paris climate agreement, Trump seems to be putting everything on the table. "America"s global engagement, in all its forms, can be expected to suffer substantially, posing a serious challenge to the liberal international order," says Palacio, who worries that geopolitical spheres of influence could replace the multilateral global arrangements that emerged in the wake of WWII. "As we know all too well," she warns, "while spheres of influence can give the appearance of stability, they breed great power conflict."

Likewise, Fischer believes that Trump, once in office, is unlikely to deviate from the ad hoc approach that brought him to power. "[W]e should not harbor any illusions" about the consequences, Fischer says. Without "US leadership, the West cannot survive." While the US "will remain the world"s most powerful country by a wide margin," an America "that moves toward isolationist nationalism," he argues, "will no longer guarantee Western countries" security or defend an international order based on free trade and globalization."

One thing, at least, seems certain: the extent to which the US does turn its back on its global commitments will reflect Trump"s domestic economic and political imperatives. Viewed from this perspective, the fears expressed by Fischer and Palacio seem well warranted.

Consider, for example, US adherence to the Paris climate agreement, which officially entered into force four days before Trump"s victory. Trump"s ad hoc approach to the issue has been on full display ever since the election. Less than a week later, an anonymous source on Trump"s transition team said that the president-elect"s "advisers are considering ways to bypass" the procedure for quitting the accord, which stipulates a four-year period.

Barely a week later, Trump, who during his campaign had dismissed climate change as a Chinese "hoax" intended to undermine US competitiveness, promised to keep an "open mind" about it. And yet, despite a direct appeal to Trump by 365 major US companies and investors not to withdraw from the Paris agreement, he selected a high-profile climate-change denier with deep ties to the fossil-fuel industry to head the US Environmental Protection Agency.

Trump"s choice would not surprise Gros. "During the campaign," he points out, "Trump pledged to ensure energy self-sufficiency -an effort that would probably entail new subsidies for domestic oil, gas, and possibly coal production." And, while that may be good for Europe"s economy in the short term- as Gros says, it "would help to suppress oil prices, which would be "a boon for the eurozone"s energy-importing countries" – a US withdrawal from global efforts to combat climate change would have a significant impact on long-term sustainability.

The larger question is whether Trump"s "America first" approach will deliver on his promise of faster, more inclusive growth, and how his administration"s success or failure will affect domestic and international governance. As Kaletsky persuasively argues, realizing Trumpism"s promising short-term prospects -by way of significantly larger budget deficits, far-reaching industrial and financial deregulation, and an end to liberal interventionism abroad- would almost certainly entail high medium- and long-term costs in terms of domestic macroeconomic and global stability.

At that point – or sooner, if Trump"s policies fail to deliver on the demand side, as skeptics like Feldstein suggest -Trump is unlikely to embrace the "bold experimentation" that defined Franklin D. Roosevelt"s approach to domestic and international governance in the 1930s and after. His governing team- starting with Bannon, his chief adviser, a self-described "Leninist" who wants to "destroy the state" – seems built for a very different path.

John Andrews asks whether Carl Bildt, Joscha Fischer, Ana Palacio, and other Project Syndicate commentators are right to be so uneasy about the incoming US administration.

Issue Adviser: a critical review of Project Syndicate"s hardest-hitting commentaries on an urgent global issue.

– The Trump Enigma (Project Syndicate – 16/12/16)

US President-elect Donald Trump"s incoming cabinet now includes retired generals, plutocrats, and people who would abolish the very departments they will lead. But it is still unclear how Trump will actually govern, which has become a source of growing anxiety for the rest of the world.

Winchester.- Former New York Governor Mario Cuomo once quipped that triumphant politicians tend to "campaign in poetry and govern in prose." Donald J. Trump"s campaign rhetoric was hardly poetic, and the transition to his presidency suggests that he will govern the United States not in prose, but in tweets.

Beyond Twitter, Trump"s cabinet nominations also enable us to discern what his presidency will look like. So far, he has selected an unprecedented mix of retired generals and superrich political arrivistes: General James Mattis as Secretary of Defense; General John Kelly as Secretary of Homeland Security; Steven Mnuchin, formerly of Goldman Sachs, as Secretary of the Treasury; Wilbur Ross, a billionaire investor, as Secretary of Commerce; Betsy DeVos, a billionaire heiress, as Secretary of Education; and Rex Tillerson, CEO of ExxonMobil, as Secretary of State.

That is not a cast of characters that will glide through the Senate confirmation process unscathed. Democrats are already sharpening their knives, and the narrow Republican majority includes powerful critics of Trump, such as South Carolina"s Lindsey Graham and Arizona"s John McCain – a former prisoner of war whom Trump belittled during the campaign.

Meanwhile, General Michael Flynn, Trump"s choice for national security adviser, needs no Senate confirmation, but will nonetheless continue to draw criticism, not least for his outspoken antipathy to Islam generally, and to "radical Islam" in particular. Flynn once called Islam a "cancer," and tweeted that "fear of Muslims is RATIONAL." During Trump"s campaign rallies, Flynn denounced Hillary Clinton for using a private email server, and led chants of "lock her up." And yet, while serving in Afghanistan, he was sanctioned for sharing information about CIA operations with unauthorized non-US citizens.

Trump"s campaign and transition have made informed analysis of his incipient administration all the more important, and Project Syndicate"s commentators have been assessing what a US president who has promised to be "unpredictable" will mean for Americans, and for the world. By and large, their doubts and unease have only deepened in recent weeks.

Russian Roulette

So far, the biggest controversy in the run-up to Inauguration Day concerns the Trump team"s links to Russia and its president, Vladimir Putin. As ExxonMobil"s CEO, Tillerson negotiated that company"s vast investments in Russia, and was awarded Russia"s "Order of Friendship" in 2013; and, last year, Flynn gave a paid speech and dined with Putin at an event hosted by RT, a Kremlin-controlled media outlet that emerged as one of the main sources of fake news during the recent US election cycle. Moreover, Trump has scorned US intelligence agencies" conclusion -now more categorical than ever- that Russia conducted cyber operations to influence the election"s outcome in his favor. "These are the same people that said Saddam Hussein had weapons of mass destruction," Trump"s transition team responded.

Nina Khrushcheva -a great-granddaughter to Nikita Khrushchev, who as Soviet leader transferred Crimea to Ukraine in 1954- does not mince words about Trump"s apparent Russophilia. She recalls the classic Cold War-era film The Manchurian Candidate, about a Soviet plot to take control of the US political system. "Given the fondness that Trump and so many of his appointees seem to have for Russian President Vladimir Putin," she says, "life may be about to imitate -if not exceed- art."

For Khrushcheva, Trump"s rejection of CIA intelligence about Russian hacking is particularly disconcerting: "The idea that a US president-elect would take the word of the Kremlin over that of CIA officials and even the most senior members of his own party is already bizarre and dangerous." And "the simultaneous nomination of Tillerson," she argues, "takes this love affair with a major adversary to a level unprecedented in US history."

Many other Project Syndicate commentators are equally pessimistic about how Trump will reorient American policy with respect to Russia. Slawomir Sierakowski, the founder of Poland"s Krytyka Polityczna movement, and Director of the Institute for Advanced Study in Warsaw, predicts that, as Trump embraces Putin, Western influence and soft power will wane, and Eastern European countries "will have no alternative" but to "deepen their economic and diplomatic ties with Russia."

Similarly, given Trump"s criticism of America"s "senseless wars in the Middle East," and his promise to put "America first," Joschka Fischer, a former German foreign minister, foresees "the end of what was heretofore termed the "West."" As the US turns inward, it "will remain the world"s most powerful country by a wide margin," Fischer acknowledges. "But it will no longer guarantee Western countries" security or defend an international order based on free trade and globalization."

Predicting the Unpredictable

Of course, as former Swedish Prime Minister Carl Bildt notes, the only thing we can know for sure is that, "Trump"s foreign-policy strategy is based on remaining unpredictable." In this respect, Trump seems to have something in common with North Korean leader Kim Jong-un. Since his surprise victory on November 8, Trump has backpedaled or completely reversed many of his campaign positions. The Mexican border wall that featured so heavily in his campaign will now be "a fence"; Hillary Clinton will no longer be targeted for special prosecution; climate change, once a Chinese "hoax," may have some "connectivity" with human behavior after all; torturing suspected terrorists may not be helpful; and so on.

In fact, Trump"s views on these and countless other issues remain shrouded in uncertainty. But one exception seems to be his economic policy: markets remain confident that Trump will follow through on his promise to rebuild crumbling infrastructure and cut corporate taxes. And by appointing Ross and Mnuchin to his cabinet, Trump has given America"s moguls something to cheer about – at least in the short term.

But does anyone else have reason to be hopeful? Fischer, for one, does not think so. "The only remaining questions now concern how quickly US policy will change," he says, "and how radical those changes will be." Based on Trump"s campaign, those changes could include imposing tariffs against China, tearing up the North American Free Trade Agreement, abandoning US commitments to collective defense under NATO, and withdrawing from the Iran nuclear deal and the Paris climate agreement. And Trump"s appointments -particularly of Oklahoma Attorney General Scott Pruitt, who rejects climate science, to head the US Environmental Protection Agency- suggest that he could follow through on at least some of his disturbing campaign pledges.

Indeed, while it is tempting to assume that pragmatism and inertia will keep the pre-Trump global order intact, we should not succumb to wishful thinking. It does not bode well that Trump"s first post-election phone call with a foreign leader was not with a traditional ally, but with Abdel Fattah al-Sisi, Egypt"s post-Arab Spring military dictator. Meanwhile, by speaking with almost a dozen other world leaders before getting to British Prime Minister Theresa May, Trump seems to have already dispensed with the transatlantic "special relationship" that British prime ministers have long held dear.

Even more alarmingly, Trump ignored – or may have been ignorant of – America"s decades-old "One China" policy when he spoke with Taiwan"s independence-minded president, Tsai Ing-wen. Faced with widespread criticism and a furious Chinese government, Trump tweeted, "Interesting how the US sells Taiwan billions of dollars of military equipment but I should not accept a congratulatory call." As Bildt points out, the Taiwan imbroglio, and Trump"s stream of provocative tweets in response, indicates that the incoming administration "might subject even the most fundamental aspects of US foreign policy to renegotiation and new "deals.""

Bark or Bite?

Bildt, like many Project Syndicate commentators, fears what will happen if Trump does scrap the Iran nuclear deal and reneges on American commitments under the Paris climate agreement. "These are two of the international community"s only significant diplomatic achievements in recent years," he writes. "The consequences of a US retreat from them are anyone"s guess. In any case, global stability will certainly suffer."

Christopher Hill, a former US ambassador to Iraq, agrees that abrogating the Iran accord would only worsen matters. "Iran may not offer much in the way of solutions," he acknowledges, "but, if the US abandoned the nuclear deal, the country could easily exacerbate the region"s turmoil." And as Bildt, writing from Saudi Arabia, observes, "now that unpredictability is the order of the day, and a collective "me first" outlook has taken hold," there is a clear "possibility that turmoil could go global."

Hill is surely right about the Iran deal, and the Trump administration will soon learn that any efforts to torpedo it will be resisted by the other parties to the agreement – Russia, China, Britain, France, and Germany. As it happens, some potential cabinet members already seem to realize this. Mattis -despite his "Mad Dog" moniker and deep animosity toward Iran- has already acknowledged that it would be a mistake to go back on the Iran accord. Tillerson seems to share this view, and is undoubtedly aware that Iran is now entering into deals that will make its petroleum reserves available to American competitors such as France"s Total, Norway"s DNO, and Shell (an Anglo-Dutch company).

Trump"s anti-trade, anti-NATO rhetoric suggests that the US is heading toward isolationism. But, as Harvard political scientist Joseph Nye argues, "technology is promoting ecological, political, and social globalization in the form of climate change, transnational terrorism, and migration – whether Trump likes it or not." Thus, Nye concludes, "World order is more than just economics, and the United States remains central to it."

Nye makes an important point: domestic political forces within the US -such as the powerful pro-Israel lobby– will prevent it from abandoning global engagement. Similarly, Nye points out that America"s best option for managing "China"s global rise" will not change, just because the occupant of the White House does. The new administration will have no good reason to abandon the current "integrate but insure" strategy, "under which the US invited China to join the liberal world order, while reaffirming its security treaty with Japan."

On Russia, Nye believes Trump could end up being a pragmatist, but only if he can "resist Putin"s game-changing challenge to the post-1945 liberal order"s prohibition on the use of force by states to seize territory from their neighbors." Nye points out that, because Russia still has "a nuclear arsenal sufficient to destroy the US," it cannot simply be ignored; and he thinks that Trump "is correct to avoid the complete isolation of a country with which the US has overlapping interests when it comes to nuclear security, non-proliferation, anti-terrorism, the Arctic, and regional issues like Iran and Afghanistan."

Domestic Disputes

But Trump"s victory did not occur in isolation, and Danny Quah and Kishore Mahbubani, both from Singapore"s Lee Kuan Yew School of Public Policy, suggest that the connection between his election and the United Kingdom"s Brexit referendum in June reflects the diminution of America"s ability to pursue a global strategy. Income inequality -however real- is an inadequate explanation for these political upheavals, they argue. The real issue is geopolitical change: "The power of the transatlantic axis that used to run the world is slipping away, and the sense of losing control is being felt by these countries" political elites and ordinary citizens alike."

Although this explanation can"t fully account for the rise of populism elsewhere, it has the ring of truth: the Brexiteers" simple but powerful slogan was "Take Back Control," and Trump"s was to "Make America Great Again." For many supporters of these campaigns, Quah and Mahbubani show, the issue was "not anger at being excluded from the benefits of globalization, but rather a shared sense of unease that they no longer control their own destinies." Of course, economic and political realities will eventually disappoint the voters who identified with these slogans, and one of the biggest questions over the next four years will be whether the popular anger that Trump fomented -or the Republican Party establishment that he humiliated during the campaign- will turn against him.

Elizabeth Drew, who has chronicled the US political scene for decades, thinks this is a real possibility, not least because Trump"s appointments so far seem to be entirely at odds with his populist campaign, which promised to improve conditions for the working class. Drew points out that DeVos"s education-policy track record is limited to "a disastrous effort to privatize Michigan"s schools," and Trump"s choice to head the Department of Labor, Andy Puzder, "is a fast-food chain owner who opposes raising the minimum wage to livable levels or expanding overtime pay; indeed, his company has run afoul of overtime laws."

The US electorate will only become more diverse in the years to come; and yet, Drew observes, "Trump"s pick for Attorney General, Alabama Senator Jeff Sessions, cares little for civil-rights laws or immigration." And, like Pruitt, who has close ties with the fossil-fuel industry and has been suing the agency he will lead, Trump"s pick to head the Department of Energy, former Texas Governor Rick Perry, vowed during the Republican primary (he crashed out early) to abolish the department.

Given the poor qualifications of Trump"s proposed cabinet, Drew believes that his nominees will receive "a tough grilling" in the Senate confirmation process, with the Democrats "potentially defeating one or two." But, as she rightly points out, the Republicans will be the deciding factor, with many already pushing back against "Trump"s threats to start trade wars." And trade isn"t the only issue dividing Republicans. Graham, for example, has conditioned his support for Tillerson on the nominee"s acknowledge of Russia"s interference in the election. Trump may rail against establishment Republicans, but Drew suggests that browbeating won"t work. "If he pushes them too far," she concludes, "Trump may be a general with few troops."

With Friends Like These…

But Trump won"t need congressional troops to upend the international order, given the wide latitude the US Constitution gives to the president to formulate and implement foreign policy. And that is a growing cause of concern for many non-Americans. As Fischer points out, the geopolitical "West was founded on an American commitment to come to its allies" defense," and it "cannot exist without the US playing this crucial role, which it may now abnegate under Trump."

Fischer echoes the concern that Mark Leonard, Director of the European Council on Foreign Relations, bluntly expressed shortly after the election: "American guarantees are no longer reliable." Beyond expressing skepticism about international agreements and the NATO alliance, Trump has "encouraged Japan and South Korea to obtain nuclear weapons." And, Leonard laments, "In Europe, the Middle East, and Asia, Trump has made it clear that America will no longer play the role of policeman; instead, it will be a private security company open for hire."

But not all regions will be affected equally by Trump"s presidency, and Sierakowski worries that the "biggest loser" will be "the EU, which is internally conflicted and unable to address economic, demographic, and refugee crises." Sierakowski thinks that the EU will now have to move toward "something resembling the Concert of Europe, which stabilized the continent between 1815 and World War I."

A new "Concert of Europe" may seem both unlikely and unnecessary, given that there are other multilateral institutions -such as the United Nations, NATO, and the World Trade Organization- to keep the world more or less on an even keel. "Beyond being the indispensable power, the US is the interconnected power, "Ana Palacio, a former Spanish foreign minister, rightly notes. "It is the hub of the linkages holding the world together, from the dollar to security to law to research and innovation." Whatever damage Trump inflicts on "the rules-based international order," she warns, "would pale in comparison to the harm wrought by a truly isolationist and withdrawn US that fails to uphold these bonds."

One can certainly hope that, as Nye suspects, the forces of globalization will limit Trump"s capacity to act unilaterally on the world stage. But no scenario can be ruled out. Clinton would have entered the Oval Office as a known quantity whose ability to manage the institutional machinery of the status quo was never in doubt; indeed, the electorate"s familiarity with her may be the most important reason why so many rejected her. By contrast, Trump is a novelty: oddly coifed real-estate billionaire and reality-TV star who has refused to dispel concerns about potential conflicts of interest, including in his relations with foreign governments, by divesting from his business or releasing his tax records.

Bildt worries that the geopolitical risks posed by cronyism are exacerbated by Trump"s callow indifference to the norms that for decades have enabled the world to ensure that "even unexpected events" can be contained. Trump"s presidency will thus heighten "the possibility that turmoil could go global," Bildt says. "One should not exaggerate the risk of things spiraling out of control," he admonishes, "but it is undeniable that the next crisis could be far larger than what we are used to, if only because it would be less manageable."

It is too soon to panic. But growing anxiety about what Trump will do is not irrational. As Bildt puts it, "while it is not time to head for the bunkers, it certainly wouldn"t hurt to have one nearby."

(John Andrews, a former editor and foreign correspondent for The Economist, is the author of The World in Conflict: Understanding the World"s Troublespots)

The economic and geopolitical implications of US President-elect Donald Trump"s incoming administration are becoming more clear. But Richard N. Haass, Simon Johnson, Carmen Reinhart, and other Project Syndicate contributors question whether Trumpism is a sustainable political force.

Editors" Insight: a review of the best thinking on current events and key trends.

– 2017: Through the Populist Looking Glass (Project Syndicate – 6/1/17)

The main question at the start of the year is whether the post-1945 world order, now in its eighth decade, can be sustained once US President-elect Donald Trump takes office this month. To address that question, it is essential to understand how sustainable Trump"s power will be.

A new year is supposed to begin in hope. Even in the darkest days of World War II, New Year celebrations were sustained by the belief that somehow the tide would turn toward peace. There was vision then, too. Writing after the fall of France in 1940, Arthur Koestler insisted that the "whole problem was to fix [Germans"] political libido on a banner more fascinating than the swastika, and that the only one which would do is the stars and stripes of the European Union." Others, too, were already imagining the international institutions and domestic reforms -enfranchisement of women in France, the British National Health Service, the United States" GI Bill- that would ground the post-war global order.

The start of 2017 offers no such consolations. This year, the main question is whether the post-war order, now in its eighth decade, can be sustained once US President-elect Donald Trump takes office on January 20. Trump has repeatedly signaled that Russian President Vladimir Putin is a kindred spirit whose efforts to influence Western countries" elections, subvert the EU, and restore a Russian sphere of influence that includes Ukraine and much of Eastern Europe will face few US impediments. Add to this Trump"s willful ignorance, conflicts of interest, and reckless China-baiting, and the world seems set to enter a radically disruptive period, largely reflecting the breathtaking capriciousness of a Trump-led US foreign policy.

At home, too, Trump and the Republican Party he now leads have done little to reassure those who fear his presidency. Despite his lack of experience in public office, he has filled his administration with callow tycoons and retired military officers, rather than seasoned policymakers. At the start of the year, a Gallup poll found that Americans" confidence in Trump"s ability to carry out his duties was some 30 points lower (and below 50% on some issues) than it was for his three immediate predecessors, prior to their inaugurations.

Project Syndicate contributors" own unease -if not dread- concerning Trump has often been evident from their commentaries" very titles. Former Swedish Prime Minister Carl Bildt, for example, suggests that readers should "Head for the Bunkers," while NYU"s Nouriel Roubini worries that Trump"s presidency will mean ""America First" and Global Conflict Next."

The prospect that Trump and populist leaders elsewhere could consolidate their hold on voters -enabling them to dismantle even a liberal democracy with America"s vaunted constitutional checks and balances- adds to the anxiety. Slawomir Sierakowski, Director of Warsaw"s Institute for Advanced Study, suggests that Poland"s ruling Law and Justice (PiS) party, by fusing nationalism and economic redistribution, may have found a strategy for entrenching what he calls "elected dictatorship." And Rob Johnson, President of the Institute for New Economic Thinking (INET), argues that something similar is possible -though by no means inevitable- in the US.

Not all Project Syndicate commentators are so pessimistic. Trump, who lost the popular vote, may in fact be weaker than he appears, and opposition within his own party – particularly over his embrace of Russia and hostility to free trade- is likely to persist. Nonetheless, as several commentators suggest, policy overreach may become a genuine risk for Trump only when Americans" own political libido becomes fixed on a more fascinating banner.

A Diplomacy of Disorder

For now, that banner is "America first." Trump, as former Israeli foreign minister Shlomo Ben-Ami puts it, will avoid becoming "caught up in thorny moral dilemmas, or letting himself be carried away by some grand sense of responsibility for the rest of the world." But while Trump has attracted the admiration of putative foreign-policy "realists" such as Henry Kissinger"s biographer, Niall Ferguson (and a favorable assessment from Kissinger himself), Ben-Ami dismisses as "delusional" the belief that "the proudly unpredictable and deeply uninformed Trump" could "execute grand strategic designs." On the contrary, by "[p]rovoking China, doubting NATO, and threatening trade wars," Ben-Ami says, "Trump seems set to do on a global scale what former President George W. Bush did to the Middle East – intentionally destabilize the old order, and then fail to create a new one."

And if Trump does turn "US geopolitical strategy toward isolationism and unilateralism," Roubini warns, the chaos and conflicts gripping the Middle East for the better part of a generation are likely to spread. During the run-up to WWII, he notes, protectionist tariffs "triggered retaliatory trade and currency wars that worsened the Great Depression," while "isolationism…allowed Nazi Germany and Imperial Japan to wage aggressive war and threaten the entire world."

Today, Roubini continues, in the absence of "active US engagement in Europe, an aggressively revanchist Russia will step in." Likewise, "if the US no longer guarantees its Sunni allies" security, all regional powers -including Iran, Saudi Arabia, Turkey, and Egypt- might decide that they can defend themselves only by acquiring nuclear weapons." And "Asian allies such as the Philippines, South Korea, and Taiwan," he points out, "may have no choice but to prostrate themselves before China," while "other US allies, such as Japan and India, may be forced to militarize and challenge China openly."

Former Spanish foreign minister Ana Palacio and former German foreign minister Joschka Fischer share Roubini"s fears. As Palacio points out, Trump"s presidency comes at a time when the "dissolution of the liberal rules-based global system" is already well underway, owing to "a lack of progress in the development of institutions and legal instruments." And Fischer has little doubt that Trump, "an exponent of the new nationalism," will contribute to this atrophy, particularly that of the post-war order in Europe. To the extent that "the Trump administration supports or turns a blind eye to" Putin"s destabilization efforts in Europe, "the EU -sandwiched between Russian trolls and Breitbart News- will have to brace itself for challenging times indeed."

The Shape of Shocks to Come

The risks are exacerbated by the likelihood that they will be misinterpreted – and thus mismanaged. This partly reflects the difficulty of parsing 140-character policy proclamations: Bildt, who has also served as Sweden"s foreign minister, is certainly not alone in foreseeing "a routine spectacle of international destabilization via Twitter." Since the election, he notes, "Trump has indicated that he might subject even the most fundamental aspects of US foreign policy to renegotiation." And he has unfailingly done so on a public platform that allows for little nuance and even less constructive dialogue. Just before Christmas, for example, one tweet seemed to upend US nuclear doctrine.

But greater clarity about Trump"s views on issues (if only because he tweets about them more often) may be no less jarring. For example, MIT Sloan"s Yasheng Huang says that, by "calling into question the "One China policy"" with respect to Taiwan, "Trump is playing with fire." The most ominous risk is that he could end up "inflaming Chinese government and military hardliners, if he confirms their belief that the US wants to undermine their country"s "core interests."" And, like Ben-Ami and Roubini, Huang is convinced that in goading China, Trump "is simultaneously empowering and enabling it." Indeed, "[w]ith Trump"s help," he concludes, "the "Chinese Century" may arrive sooner than anyone expected."

President Barack Obama"s bold opening to Cuba also seems destined for Trumpian disruption. "Because Congress refused to normalize US-Cuba relations by repealing the US embargo," points out Jorge Castañeda, a former Mexican foreign minister, "Obama was forced to resort to legally reversible executive orders to loosen restrictions on travel, remittances, and trade and investment." Trump "has promised" -once again on Twitter – "to undo all of this unless he can get "a better deal for the Cuban people, the Cuban-American people, and the US as a whole."" But such a deal, says Castañeda, "is a nonstarter: the Castro regime is not going to do what it has never done and negotiate internal political issues with another country."

In Asia, the Trump effect is already undermining longstanding policy initiatives by the region"s democratic leaders. Japan is perhaps most imperiled, which may explain why Prime Minister Shinzo Abe rushed to New York to meet the president-elect – the first foreign leader to do so.

For years, says Brahma Chellaney of New Delhi"s Center for Policy Research, Abe "has assiduously courted" Russia. Abe"s "overtures to Putin" were a central plank in his "broader strategy to position Japan as a counterweight to China, and to rebalance power in Asia, where Japan, Russia, China, and India form a strategic quadrangle." In Abe"s view, "improved relations with Russia -with which Japan never formally made peace after World War II- are the missing ingredient for a regional power equilibrium."

But Trump"s wooing of Putin has left Abe in the lurch. With "the US in its corner," Chellaney notes, Russia "won"t need Japan anymore." Moreover, Abe has been undermined by Trump"s promise to withdraw the US from the 12-country Trans-Pacific Partnership. Abe saw the TPP "as a means to prevent China from becoming the rule-setter in Asian trade," says former Economist Editor-in-Chief Bill Emmott. Without the TPP, "it is now increasingly likely that China will step into that role."

It is in the ruins of Aleppo, however, that one may be able to discern most clearly the likely international impact of Trump"s "America first" presidency. Of course, Trump cannot be blamed for Syria"s mayhem. As Christopher Hill argues, the debacle in Syria is due to "a display of spectacularly incompetent diplomacy" by Obama. But the foreign policy Hill foresees under Trump is one that pursues US goals "without any serious effort to marshal international support, or even to take stock of other opinions or interests."

Richard Haass, President of the Council on Foreign Relations, is equally scathing about US diplomacy in Syria and the precedent it sets, because "not acting in Syria has proved to be as consequential as acting." And not just for Syria: the world has recently seen the US pushed to the sidelines by Iran, Russia, and Turkey in the effort to stop the fighting there. Whatever the shortcomings of Obama"s foreign policy, in the Middle East or elsewhere, US geopolitical leadership and initiative are likely to be in even shorter supply under Trump.

Trumping the US Economy

One wouldn"t know it from Trump"s tweets, but Obama is leaving behind a US economy that is stronger than it has been since the beginning of George W. Bush"s presidency 16 years ago. Annual GDP growth stood at 2.9% in the third quarter of 2016; the unemployment rate is under 5%; and the US budget and trade deficits have been declining throughout Obama"s second term. If Trump were to behave as he normally does, he would simply take credit for Obama"s success and maintain his policies, which clearly (albeit slowly) have been repairing the massive economic damage bequeathed by the worst financial crisis since the Great Depression.

Fat chance. All indications -from the details of his economic policies to the cabinet officers chosen to implement them- are that Trump, and the Republican-controlled Congress, are poised to undo as much of Obama"s legacy as possible. The "organizing principle" of Trump"s economic policies, says Simon Johnson, a senior fellow at the Peterson Institute for International Economics, "seems to be to discard pragmatism entirely and advance an extreme and discredited ideology." It is an agenda "structured around deep tax cuts, sweeping deregulation (including for finance and the environment), and repeal of…Obama"s signature health-care reform, the Affordable Care Act." And now that House Republicans "have started to think about an import tariff as part of their tax "reform" package," Johnson argues, "they will all start to get on board" with protectionism, despite having recently supported the TPP.

That remains to be seen. But if Trump imposes a tariff, as he now seems certain to do, "some or all of America"s trading partners will most likely retaliate, by imposing tariffs on US exports," Johnson continues. "As US export-oriented firms -many of which pay high wages- reduce output, relative to what they would have produced otherwise, the effect will presumably be to reduce the number of good jobs."

Likewise, the economists Gita Gopinath, Emmanuel Fahri, and Oleg Itskhoki are dubious of the impact on the trade balance of the Trump team"s "proposal to cut corporate-tax rates and impose a border-adjustment tax," which, like a value-added tax, "would treat domestically purchased inputs and imported inputs differently, and encourage exports." That strategy, they argue, is unlikely to work "for the simple reason that the US authorities maintain a flexible exchange rate." Assuming full implementation of Trump"s proposed tax reforms, "the dollar will appreciate along with demand for US goods," which "will offset any competitiveness gains."

Harvard"s Carmen Reinhart makes a similar point about Trump"s plans. The dollar, she points out, is now up "by more than 35% against a basket of currencies since its low point in July 2011." And continuing exchange-rate appreciation poses "a major obstacle to fulfilling his promise" -so resonant in the Rust Belt states that he narrowly won- "to bring back US manufacturing, even if doing so requires imposing tariffs and dismantling existing trade arrangements."

That leaves Trump with few options. As Gopinath, Fahri, and Itskhoki point out, the Federal Reserve is unlikely to lean against dollar appreciation by reducing interest rates, as this would stoke domestic inflation. And Reinhart all but rules out an updated version of the 1985 Plaza Accord, which engineered the dollar"s depreciation against the Deutsche Mark and the yen. "Sustained appreciation of the yen," she argues, "would probably derail the modest progress forged by the Bank of Japan in raising inflation and inflation expectations."

Moreover, "it will not be the Bundesbank that sits at the table in 2017" but the "European Central Bank, which is coping with another round of distress in the periphery" of the eurozone, making a weak euro a "godsend." That leaves China. But, "given the negative impact of the strong post-Plaza yen on Japan"s subsequent economic performance," Reinhart observes, "it is unclear why China would consider a stronger renminbi to be worth the risk."

Of course, inaction by China could expose it to another stream of incensed tweets -now bearing the US presidential seal- about its supposed "currency manipulation." But, just as Trump appears to be in denial about the effects of a rising dollar, his "tough talk" on trade in general, and on China in particular, "fails a key reality check," says Yale University"s Stephen Roach. It is America"s "significant domestic saving deficit," Roach points out, that accounts for its "insatiable appetite for surplus saving from abroad, which in turn spawns its chronic current-account deficit and a massive trade deficit."

The problem, Roach warns, is that, unlike Trump"s nocturnal tweets, the incoming "administration is playing with live ammunition" against an adversary that has plenty of ammo of its own, implying profound, global repercussions. For a leader not known for careful deliberation, and who has surrounded himself with "extreme China hawks," the mere fact that turning "trade into a weapon" would likely amount to what Roach calls "a policy blunder of epic proportions" is no reason to believe that it won"t happen.

Realizing Resistance

Even if that blunder is avoided, Chris Patten, Chancellor of the University of Oxford, suggests that there are likely to be others, in part because social media themselves, he believes, have become a form of live ammunition, by enabling "lies to crowd out the truth in public discourse and debate." Patton, however, assumes that truth can crowd back in. What is needed, he argues, is to counter falsehoods with facts: challenging co-workers who cite "fake-news headlines or ignorant, prejudiced claims," calling out misleading news programs, and urging "community leaders to roll up their sleeves and do the same."

Princeton University"s Peter Singer, however, doubts that mere insistence by individual citizens on factual accuracy will be enough to defend the integrity of democratic elections from fake news. Singer cites the example of a YouTube video, watched 400,000 times prior to the US election (and since removed), in which the far-right US conspiracy theorist Alex Jones charged that "Hillary Clinton has personally murdered and chopped up and raped" children. Revisiting Supreme Court Justice Louis Brandeis"s famous concurring opinion in Whitney v. California, Singer thinks that "Brandeis"s belief that "more speech, not enforced silence" is the remedy for "falsehood and fallacies" looks naïve, especially if applied in an election campaign." Given the time and cost of civil defamation lawsuits, and their effectiveness "only against those who have the assets to pay whatever damages are awarded," Singer wonders whether it is "time for the legal pendulum to swing back toward the offense of criminal libel."

Beyond regulation of speech, more hardheaded policies will be needed in other areas. Fischer argues that Europe, in particular, must be pro-active in defending its interests, especially because Russia regards "weakness or lack of a threat from its neighbors" not "as a basis for peace, but rather as an invitation to extend its own sphere of influence." For more than seven decades, Europeans have been able to concentrate on other matters. "The old EU developed into an economic power because it was protected beneath the US security umbrella," he observes. "But without this guarantee, it can address its current geopolitical realities only by developing its own capacity to project political and military power."

Back in the US, Laura Tyson of the University of California at Berkeley and the Presidio Institute"s Lenny Mendonca believe that state and local governments may also offer an effective source of resistance. "The answer to Trumpism," they argue, "is "progressive federalism": the pursuit of progressive policy goals using the substantial authority delegated to subnational governments in the US federal system." In particular, states like California, which has the world"s sixth-largest economy and voted overwhelmingly for Clinton, can become a center of what Tyson and Mendonca call "uncooperative federalism," which implies "refusing to carry out federal policies that it opposes." For example, the state legislature is considering "new bills to finance legal services for immigrants fighting deportation and to ban the use of state and local resources for immigration enforcement on constitutional grounds."

Capture the Flag?

Most important, Sierakowski suggests, is to stop assuming that populism will simply self-destruct. To be sure, one key vulnerability of populist rulers, according to Sergei Guriev, Chief Economist at the European Bank for Reconstruction and Development, is their claim "that they alone can fix their countries" problems." Trump has said this explicitly, and because many "people regard a successful CEO as someone who can deliver on well-defined objectives," Guriev notes, "they conclude that a businessman can solve social problems that a politician cannot."

The flaw in this thinking, according to Guriev, is that political leaders "with a corporate mindset are likely to focus more on efficiency than inclusion." But, whereas "the corporate leader can eliminate jobs and issue severance payments to redundant workers," governments must concern themselves with "[w]hat happens to these workers subsequently." The risk, then, is that when a corporate mentality informs policymaking, "reforms ignore or alienate too many voters," causing leaders to lose their popularity.

This, says Sierakowski, is what many assume will inevitably happen to populist governments. The "conventional view of what awaits the US (and possibly France and the Netherlands) in 2017 is an erratic ruler who enacts contradictory policies that primarily benefit the rich," he says. On Jaroslaw Kaczynski"s return to power in Poland a year ago, his opponents believed precisely that: his government (in which he holds no formal role) "would work for the benefit of the rich, create chaos, and quickly trip himself up – which is exactly what happened in 2005-2007," the first time the PiS was in power.

Not this time. The PiS, says Sierakowski, has "transformed itself from an ideological nullity into a party that has managed to introduce shocking changes with record speed and efficiency." Instead of its previous neoliberal economic policies, the PiS has "enacted the largest social transfers in Poland"s contemporary history," thereby causing the poverty rate to "decline by 20-40%, and by 70-90% among children." Generous welfare provision, combined with socially conservative nationalism, has proven to be highly effective at locking in voter support. Indeed, as long as Kaczynski "controls these two bastions of voter sentiment, he is safe," Sierakowski believes. "Those who seek to oppose Trump," he concludes, "can draw their own conclusions from that fact."

But how applicable is Poland"s experience to other countries in general, and the US in particular? INET"s Johnson acknowledges the possibility that Trumpism could become a durable political force. "If the Republicans pass a Keynesian growth package in the next two years that tightens labor markets and raises wages, they could secure their grip on power for many years to come," he believes, even as they "ignore or undercut women"s and worker"s rights, environmental protection, and public education."

But Johnson is not convinced that the Republicans are inclined to adopt the reforms needed to ensure that the benefits of growth are widely shared. On the contrary, "it is likely that Trump"s proposed fiscal expansion will again disproportionately benefit the wealthy, without "trickling down" to the rest of Americans." He points out that while ""public-private partnerships" have been championed as a means to direct capital toward a national rebuilding effort," experience in recent years shows that "such measures can be manipulated, and often lead to "heads I win, tails the taxpayer loses" outcomes that have benefited Wall Street and Silicon Valley."

Of course, the consolidation of Trumpism cannot be ruled out. Congressional Republicans" rapid embrace of protectionism, together with their hasty retreat from a move to dismantle the independent Office of Congressional Ethics, suggests that they are likely to accede to Trump -even on matters of supposed principle- to remain in power. And yet context matters. America"s electoral system and political parties are much more candidate-centered than in other developed countries, creating significant scope for opposition from within. This has become apparent in Trump"s conflict with Republican senators and US intelligence agencies over his rejection of well-founded allegations that Russia "hacked" the election on his behalf.

Moreover, whereas Poland has one of the world"s most ethnically homogeneous societies, the US has one of the least. This implies that the political capital to be gained from anti-immigrant discourse, which Sierakowski thinks Kaczynski"s opponents must adopt in order to defeat him, is far more limited in the US. Trump"s allies can be expected to compromise their values. If his opponents do likewise, they are likely to find that bad policies are also bad politics.

Anatole Kaletsky asks whether Trumpism represents a new economic model – and seeks answers from Martin Feldstein, Nobel laureates Edmund Phelps and Joseph Stiglitz, and other Project Syndicate contributors.

Editors" Insight: a fortnightly review of the best thinking on current events and key trends.

– Trumping Capitalism? (Project Syndicate – 20/1/17)

Donald Trump"s presidency is a symptom of an interregnum between economic orders – a period that will result in a new balance between state and market. While his administration"s economic policies are unlikely to provide the right answer, they may at least show the world what not to do.

London.- Donald Trump"s inauguration as the 45th president of the United States is widely seen as the beginning of the end of the post-1945 capitalist order that became globally dominant after the Cold War"s end. But is it possible that Trumpism is actually the end of the beginning? Could Trump"s victory mark the end of a period of post-crisis confusion, when the economic model that failed in 2008 was finally recognized as irretrievably broken, and the start of a new phase of global capitalism, when a new approach to economic management gradually evolves?

If history is any guide, the near-collapse of the global financial system in 2008 was always likely to be reflected -after a lag of five years or so- in challenges to existing political institutions and prevailing economic ideology. As I have recently explained – and described in greater detail in my 2010 book Capitalism 4.0- this was the sequence of events that followed previous systemic crises of global capitalism: liberal imperialism followed the 1840s revolutions; Keynesianism followed the Great Depression of the 1930s; and Thatcher-Reagan market fundamentalism followed the Great Inflation of the 1970s. Could Trumpism -understood as a lagged response to the 2008 crisis- herald the emergence of a new capitalist regime?

This question can be divided into three parts: Can Trump"s economic policies work? Will his administration"s economic program be politically sustainable? And what impact might Trumpism have on economic thinking and attitudes to capitalism around the world?

Trickle-Down Redux

On the first of these issues, a few Project Syndicate commentators see some grounds for hope, but most are deeply pessimistic, a stance epitomized by Nobel laureate Joseph Stiglitz. "There really is no silver lining to the cloud that now hangs over the US and the world," he argues. "The only way Trump will square his promises of higher infrastructure and defense spending with large tax cuts and deficit reduction is a heavy dose of what used to be called voodoo economics." For Stiglitz, Trump represents a re-enactment of the Reagan era"s socially regressive trickle-down economics, but with the addition of two further lethal ingredients – a trade war with China and a loss of access to health care for millions.

The political consequences, Stiglitz believes, will be disastrous. Experience shows that this trickle-down "story does not end well for Trump"s angry, displaced Rust Belt voters," who will be tempted to seek even more aggressively for scapegoats once they realize how profoundly Trump has betrayed their interests.

Simon Johnson of MIT Sloan and the Peterson Institute for International Economics reaches a similar conclusion. Trump"s economic-policy priorities are reflected in his proposed cabinet, which represents a dramatic shift to outright "oligarchy: direct control of the state by people with substantial private economic power," says Johnson. "Trump seems determined to lower income taxes for high-income Americans, as well as to reduce capital-gains tax (mostly paid by the well-off) and nearly eliminate corporate taxes (again, disproportionately benefiting the richest)."

Focusing on the politics of the new administration"s plans, Johnson, a former International Monetary Fund chief economist, notes that Trump leads "a coalition of businesspeople who wrongly believe that protectionism is a good way to help the economy" and "market fundamentalists" who are determined to cut taxes. To consolidate this coalition, the market fundamentalists are embracing protectionism, justifying Trump"s proposed import tariffs as a way to pay for slashing corporate taxes. Tariffs, however, are equivalent to increasing the sales tax. Thus, the result will be to "deflect attention from the essentials of their policy: lower taxes for the oligarchs," paid for by "higher taxes -not to mention significant losses of high-paying jobs" (as a result of protectionism) – "for almost everyone else."

Unlike Johnson, Harvard University"s Martin Feldstein, who served as Chairman of President Ronald Reagan"s Council of Economic Advisers, welcomes the prospect of a reduction in top marginal tax rates. President Barack Obama"s policies, Feldstein argues, continued an unhealthy "shift in the tax burden to those with the highest income levels" since the Reagan era.

But while Feldstein favors broadening the tax base away from the richest Americans in a "revenue-neutral way," he is skeptical about Trump"s signature promises of higher wages, more "middle class" jobs, and stronger economic growth. The "economy has essentially reached full employment, with the unemployment rate at 4.9% in October," he notes. The tighter labor market has in turn caused consumer prices to "rise 2.2% over the past year, up from 1.9% a year earlier," while "production workers" wages rose 2.4%." Given real wage growth and rising inflation, he sees "no reason to seek an increase in aggregate demand at this time."

Strange Hopes

As Feldstein"s skepticism demonstrates, Project Syndicate commentators" views of Trumponomics do not fall neatly along ideological lines. Indeed, the Harvard development economist Dani Rodrik, certainly no market fundamentalist, finds reason for hope in Trump"s opposition to "free trade" deals laden with provisions that have nothing to do with trade. As he puts it, "Adam Smith and David Ricardo would turn over in their graves if they read the Trans-Pacific Partnership," with the special preferences it offers specific industries and vested interests, and other newer trade agreements that Trump has denounced. All of them "incorporate rules on intellectual property, capital flows, and investment protections that are mainly designed to generate and preserve profits for financial institutions and multinational enterprises at the expense of other legitimate policy goals."

Thus, while Rodrik deplores Trump"s demagogic politics and his "nonsensical" claims about many of his policies, he hopes that Trump"s election will arrest a trend of hyper-globalization that has been moving faster than can be economically justified. "Economists have long known that market failures -including poorly functioning labor markets, credit market imperfections, knowledge or environmental externalities, and monopolies- can interfere with reaping gains from trade," he points out. And yet they "have consistently minimized" globalization"s capacity to "deepen societal cleavages, exacerbate distributional problems, and undermine domestic social bargains" – all outcomes that "directly affected communities in the United States."

The Keynesian economic historian Robert Skidelsky sees other positive features in Trump"s policy ideas – and even in his economic philosophy. "Trump"s protectionism harks back to an older American tradition of a high-wage, job-rich manufacturing [economy that] has foundered with globalization," Skidelsky says, and even "Trump"s isolationism is a populist way of saying that the US needs to withdraw from commitments which it has neither the power nor the will to honor."

Most important of all, says Skidelsky, Trump"s proposal of an "$ 800 billion-$ 1 trillion program of infrastructure investment," a "massive corporate-tax cut," and "a pledge to maintain welfare entitlements" adds up to "a modern form of Keynesian fiscal policy." As such, Trumpism amounts to a "head-on challenge to the neoliberal obsession with deficits and debt reduction, and to reliance on quantitative easing as the sole -and now exhausted- demand-management tool."