By Frank-Jürgen Richter
To some extent the UK’s EU referendum and the US presidential elections are quite similar. I listen to lots of utter tripe voiced as true fact by candidates of each sides of the argument from either side of the Atlantic Ocean, and rather worrisome is the force generated by US presidential hopeful, Donald Trump. The media seems to repeat and aggravate the sound bites of US and UK politicians. I note how well the UK referendum ‘In’ or ‘Out’ supporters and Donald Trump, perhaps more so than Hillary Clinton, use TV to promote their claims. It is much calmer in China.
I am in favor of new national infrastructure projects as they initially lift local GDP through increased cash flows and spending on salaries, and longer-term benefits accrue through easier trade flows. But Trump’s “Mexico barrier wall” seems to me to be a silly idea. We should note the vast Chinese infrastructure or road, rail, river, sea and regional airport networks upholding China’s desire to incorporate its urban population in its new economic projections. I agree to a great extent Chinese rural people are the equivalent of the economic migrants from Mexico. But China is not building walls; instead it is revitalizing the original Silk Road within its “One Belt and One Road” initiative stretching through Central Asia to Europe. China has expansive plans to develop the entrepreneurship of people in other nations.
The American presidential elections raise concerns for Asian nations as both Hilary Clinton and Donald Trump are against the new Trans-Pacific Partnership (TPP) trade pact – in different ways. Mrs Clinton worries that the TPP includes provisions that hide currency manipulations; while Mr Trump criticizes its 5,544 page length and claims that “…it allows China to come into the US via many backdoors and create havoc in the US economy” (but he does not explain how this may be as China is not [yet] part of the TPP).
Typically raising tariff barriers is a regular discussion point for US presidential hopefuls in their barnstorming hustings. In reality, increased tariff destroys trade by creating artificial pricing structures no matter it is an import duty or a subsidy to uplift new industries. The latter is seen in green energy schemes that are not economical as devised, but only become so after adding-in streams of subsidies. China is accused of dumping green energy products on the world market – but can we blame China for its low-wage economy that creates low-priced products? This is a fact of life accepted by market traders in the countryside or in international bourses: tariffs interfere with transparent trading. And both the US front-runners, Clinton and Trump, look to upset free market systems. This is not good for the global economy.
Many nations all too easily raise barriers to prevent external competition against local producers. Such protective measures support poor and inefficient managers who squander the earth’s resources. Isn’t it better, as Adam Smith advocated, to allow free markets to promote more equality? However Nobel Prize-winning economist Joseph Stiglitz has countered, “Markets, by themselves, produce too much pollution. Markets, by themselves, also produce too little basic research (for instance, governments have been responsible for financing or subsidizing many important scientific breakthroughs, including the first telegraph lines, the Internet and many biotech advances.)” There is a fine line to be drawn by sensitive government, or presidential, guidance – which will not be projected in the frenzy of self-marketing in the hustings.
After Clinton or Trump is elected, we will hope their permanent advisors create a more calm and nuanced approach to global trade. Meanwhile China must suffer myopic analysis of its complex transition within its “new normal” that is not reflected in Standard and Poor’s recent downgrading of China’s outlook to “negative” from “stable.” It looks to be politically motivated rather than well analyzed.
We ordinary people are left in a quandary and completely mired by spin doctors who invisibly prepare their candidates for the next TV talk show. We have too little time to undertake fundamental research into the basic facts that may or may not support the thrusts of political opponents. Competing claims cause us to be dazed, and complexities are left unexplained – such as why globalization is indeed good for all, even if one has just lost one’s job!
So be hesitant about new administrations – they promise everything to everybody. But all we know with any certainty is our present position in society within the wider world. We do not know how the future will be changed … it may be better after a while, but who knows? In the meantime, let us engage in whole-hearted, open discussions: for it is only open discussion of facts that will inspire trust – and trust is surely a needed commodity globally.
The author is founder and chairman of Horasis, a Swiss-based think tank.