With Trump leading the US, Asia needs to turn to Roosevelt
Andrew Sheng says Donald Trump’s rise marks a new era of clear self-interest where allies and allegiances change by the tweet. However, emerging Asia has nothing to fear but fear itself
Donald Trump is being inaugurated as the 45th president of the United States. Next week, the Lunar Year of the Monkey ends, ushering in the Year of the Rooster. This is where the monkey business ends and the chickens come home to roost.
Trump’s election marks a watershed between the old liberal order and a new populist phase that is clearly a rejection of the old order. Former German foreign minister Joschka Fischer defined this change as “Goodbye to the West” – or the concept that the US was committed to the defence of its allies, mostly Western Europe, Australia and Japan.
Trump has turned the old establishment on its head. Policy is not made by consensus, but by tweets. World thought-leader Mohamed El-Erian, whom I had the great fortune to moderate at his keynote address to the Asian Financial Forum in Hong Kong earlier this week, argues that the world is at a T-junction.
The old order has come to a dead end; it is not even at a crossroads, where you have the option of moving forward. At a T-junction, you either move right or left. Volatility and the range of possibilities have increased, because no one knows which policy and which rule will change with the next tweet.
Watch: Trump sparks fear with nuclear tweet
There is, of course, no difficulty in picking where Trump will move. Indeed, anyone who says Trump is unpredictable is wrong – he is very predictable. He will do whatever is in his best interest, saying that it is in America’s interest. He will move right, because the populist sentiment has rejected the old leftist liberal order. Our only concern is – how far right will he go?
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Trump’s election marks a very important juncture in Pax Americana. Two Democratic presidents marked the rise of the present American exceptionalism – Franklin D. Roosevelt (1933-1945) and John F. Kennedy (1961-1963). The first brought in the New Deal to get America out of the Great Depression and then won the second world war, confirming the new American order. The second inaugurated a more inclusive America, ushering in the global idealism of the American dream, providing aid, trade and, culturally, an “age of Camelot”.
Trump’s ascension signals the end of the rule-based era for the public good, with a new era of clear and present self-interest, changing allies and allegiances by the tweet. Allies and foes alike do not know how to react to this new Art of the Deal.
Watch: Xi Jinping defends globalisation at Davos
Crossing the river by feeling the stones was possible when there were still some stones. But crossing the swamp when the waters are murky with crocodiles and leeches will be much more complicated.
I was forced to dust off my copy of German historian Oscar Spengler’s Decline of the West, written between 1911 and 1922, to get a sense of how we should think about this era from a long-term historical perspective. Vastly simplifying his magnum opus, Spengler’s thesis is that when parliamentarian politics fails, history tends to replace disorder with great men like Julius Caesar or Napoleon. Of course, troubled times may also beget despots and decadent failures, like Caligula or Nero, who eventually bankrupted Rome.
A significant minority of Americans voted for Trump because he argued that he could make America great again. But the irony is not that America is weak, but that America is strong and on the verge of achieving the strongest recovery among the advanced economies. The perceived weakness comes from the insecurity of a significant majority of the working class that has become disadvantaged, not by globalisation, but by the benign neglect of the Washington/Wall Street elite who favoured themselves at the expense of the working class.
Globalisation has not failed. It is the high priests of globalisation trying to deflect the populist anger against anyone but themselves who created Trump.
What are Asians going to do in this Trumpian reality show?
First, we need to distinguish the signal from the noise. All the breast-beating at the World Economic Forum in Davos this week was about how the caviar-and-champagne forecasters got it all wrong. They were simply too self-congratulatory, self-referential and self-satisfied. They did not do the reality checks – of simply looking at the anger of the masses.
Second, despite the fact that the dollar is strong and will remain so if Trump gets his economic policies right, the US is still funded by global savings – mostly from Asia. Asia remains the world’s largest and fastest-growing region with the highest savings. We need to channel those savings to Asian markets, even as the US and European banks retreat home.
Watch: Trump gives pre-inauguration speech
Third, the Trans-Pacific Partnership was always an empty promise because technology and moving manufacturing jobs back to the US will not create greater exports for US trading partners. The Asian global supply chain is changing very fast from an all-points-to-one market (the US) to point-to-point, South-to-South, because – with more than half of the world’s population and a growing middle class – the potential for global trade, investment and financial expansion is still in trade between India, China, Indonesia and all the emerging markets of the world.
Watch: Trump pledges to quit TPP
If the US turns inward under Trump, then Asians need to heed Roosevelt’s wake-up call at his inauguration: “The only thing we have to fear is fear itself”. Data from the US Bureau of Economic Analysis showed that the US had net foreign liabilities of US$7.8 trillion or 41.8 per cent of GDP at the end of the third quarter of 2016. In the Year of the Rooster, this is not chicken feed.
As America moves to a new T-(for Trump) junction, the choice is not between left or right, but between a Great America or a small-minded America.
Time for Asians to think and act for themselves.
Andrew Sheng writes on global issues from an Asian perspective