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The Trump Economy: the protectionist model

Dickson Igwe. Photo: Provided
Dickson Igwe

There are lessons to be learned from a booming USA; the proceeding story is second of a series of narratives on Donald J. Trump’s business first, protectionist, economics. The narrative juxtaposes the US economic model with that of the [British] Virgin Islands.

Now, the two main political parties are arming for war in the [British] Virgin Islands. General Elections are in a matter of months. To date the Virgin Islands Party is the party that has put out a definitive statement on its economic strategy. It has stated that it will pursue an economics that drives middle class prosperity.

The middle class, those residents in the 30 K- 60K income brackets for the Virgin Islands economic model, are the majority of the population. 

A number of economists assert that middle class prosperity is the key driver of economic growth. Why: because this is the social grouping within which the majority of consumers exist. Consequently, when middle class spending accelerates, then so does the wider general economy.  

The idea of growing the middle class is Keynesian. Keynes’s idea of bottom up prosperity is the polar opposite of the Supply Sided idea of trickle down. Trickledown asserts that pursuing a business first model is best for the economy. When Jack the wealthy businessman is placed at the pinnacle of the society and everything else made to revolve around Jack, then that is the best approach for economic growth. 

OK. The most critical question voters must ask is which party and which politicians can pull the country out of a recession driven by natural disaster and a lack of vision: add decades of questionable, non-transparent, unaccountable, and unaudited governance.

Without a clear vision of where the country is headed, politics becomes nothing more than a carnival followed by a 4-year interim of spending taxpayer cash without any plan, strategy, or good outcome. This will hold terrible long term consequences for a country that is in danger of being relegated to the status of permanent underdevelopment.

OK. After 35 plus years of the Creative Destruction of Free Trading Economics, the Great Recession of 2008 reestablished John Maynard Keynes's economics as a new economics renaissance. Milton Friedman’s Rule of the world appeared to be coming to an end.

Keynes today is making an effective comeback. Massive fiscal stimulus, and macroeconomic intervention, saved the day when the financial system went “belly up” in 2008, after unsustainable leveraging threatened to plunge global financial markets into a black hole.

But, will unsustainable leveraging once again rear a head, and lead the global economy back into to default and bankruptcy?

Is a Post the Great Recession, second collapse in consumer and business confidence, in the cards as the US economy – the main engine of the global economy- heats up, with a second round of deregulation and tax cuts to powerful corporations?

Trump is sticking with Milton Friedman’s Supply Sided Business First Economic Model.

And there may be trouble ahead. The USS Enterprise, energised by Donald J. Trump’s business first economy has adopted a protectionist and aggressive stance towards markets of once friendly neighbors and allies. What is next?  

Will the US economy drop off the cliff as happened in 2008? Will the western taxpayer once again intervene to save the world from downturn and chaos? Is the US economy vulnerable to economic recession driven by an unholy alliance of America First, trickle down, and supply sided protectionism?

Boom and bust has been the narrative of the free trading, austere, economic model from the early 1980s. Boom and bust, leading to stock market crashes and political crises have been the order of the day.

Thankfully, consumer credit in the US in 2018 is not a concern. Credit in the present booming US economy is rising very slowly. This signals healthy economic and sustainable growth. It may well lead to a second Trump term if the US economy remains on fire.

Strong economic growth that is not driven by credit signals a very productive economy. Love him or hate him, Donald J. Trump is producing for the USA working man, whose employment matrix is the best it has been since the Bill Clinton Presidency.

To be continued.

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