The analysis of what happened in the US on Wednesday will go on for months in the media and for years among academics. With all the statistics of the pundits, the motivational basis of the outcome is still unknown, and the answer is likely to be very complex, involving all of the elements of intersexuality, gender, racism, xenophobic fear of Mexico and the south of the continent and simple political exhaustion following an eight-year US Democratic regime that began with high hopes and ended in mediocrity.
US President Barack Obama took office eight years ago on the Democratic ticket, just as the global recession of 2008 onward was about to hit. Reform initiatives that were premised on any idea of at least mild economic growth in the US and at a world level were shattered by the fall in investment and trade, political confusion and a continued anarchy in financial institutions. The echoes continue through the complex self-interest of all agents involved in the machinations of, especially, the City of London and Wall Street.
Against this background, and with continuing recession at a world level (all news of recovery is premature), it is worth postulating the likely effects on East Asian economic and cultural progress of US president-elect Donald Trump’s new Republicanism. Estimating the medium term is simplified if it is assumed that Republicans have majorities or at least control of the major players in both the US Senate and House of Representatives.
From the 1950s much of the growth of Japan and the newly industrializing countries of Asia was predicated on the “golden age” of the world system from approximately 1952 to 1971, when the US led the world in economic growth, technological change and cultural innovation.
In that first period, the clear leadership of the US in Cold War competition meant many sources of prosperity for fast-developing economic systems such as Taiwan’s. To retain alliances, the US sunk billions of dollars into aid, military bases, political support and massive technological transfers. Growth and innovation within the US private sector funded such ambitious globalism and created an atmosphere of successful post-war recovery associated with stable exchange rates and the spread of democracies in the face of Soviet competition.
In about 1971 this changed, as the US economy matured, labor costs rose and Japanese capitalism challenged Europe, especially in East Asia and other new markets. One reason that Taiwan and the other newly industrializing countries continued to grow and prosper is that the US continued to act as economic leader, despite its failures in manufacturing growth.
Despite the enormous pressure from agricultural, oil and other interests, the US continued with a relatively open economic policy framework, importing vast amounts of consumer goods, mass-produced electrical parts and equipment and low-tech products more generally, especially from East Asia. This allowed continued funding of technological modernization throughout the world, further boosting growth in nations such a Taiwan.
The US was no longer “golden” after 1971 — indeed it was then-US president Richard Nixon who, in removing exchange rate power from the IMF, created buoyancy of demand at a global level, despite generally falling economic performances in the West. The reason that Nixon had removed the fixed exchange rate system from dominance was that his administration wished for a rise in the global values of Japanese, German and other currencies and an effective fall in the value of the US dollar, with the idea of rendering the failing exports of US manufactures more price-competitive, and making imports from East Asia and Europe more expensive to US consumers.
So for a very long period indeed, US administrations have heroically resisted increased protectionism when feasible as a measure of their faith in what is now known as neoliberalism — a world dominated by finance and competition that would see only limited interference of government to aid the unemployed, migrants and other social groups in their societies who were losing out in the world of competition. Changing the relative value of the US dollar was seen as preferential to protectionism.
Why? First, neoliberal versions of Smithian economics said that protectionism was in most cases ineffective, reducing local output all around.
Second, political alliances were still vital as part of the US’ global vision, and these depended on good commercial relations that allowed less-developed and growing systems to import their goods into the US in exchange for technological and other exports from the US, often associated with complex investment trade deals and linkages.
Third, cheap imports from East Asia into the US were seen as a way of keeping down inflation, allowing US workers to buy cheap goods from abroad that effectively raised their living standards in the face of rising prices for internally produced goods.
This is the political-economic crux of the matter right now. The Trumpian view of the world seems either to be entirely ignorant of such things, or does not believe in any of them, or thinks that reinstating the politics of “Homeland,” aiming for US independence and military might, and forging a US citizenship not threatened by millions of foreigners and illegal migrants, together easily override the older global economic considerations.
In addition, the real threat of modern Chinese economic development, despite its recent burps and hiccups, might well sway all-powerful US interests to greater trade protectionism, and the Trump card might be the platform for a conservative answer to the Chinese challenge. Protectionism aimed at China and East Asia might be smuggled in as a political agenda in the guise of a Republican program of greater isolationism in commercial and cultural matters.
Some new regime of commercial protectionism is one of the few policy formations that the Trump camp has stuck to. Details seem to be very sparing, as in all things Trumpian. Is protectionism going to be high and sectoral — designed to keep agricultural, consumer and mid-tech imports out of the US — or is it going to be milder, but across the board on all products? Will it be by tariffs, quotas or exchange rate manipulations, and extend to the use of technical and “cultural” restrictions — for instance, imposing highly Americanized product standards on imports that can not be met by other nations. Will it extend beyond manufacturing and into intellectual properties or financial products, (eg, patenting, obtaining of copyrights and designs, etc.), and will there be greater restrictions on investment into the US?
None of this can be answered yet, but a new protectionism might actually remain as the most stalwart part of the Trump package. It fits well with the other aspects of his autarky and authoritarianism, such as the policy on the border with Mexico, migrants generally, the notion of “establishment institutions,” etc.
This is fearful for those who live in or care for the health of democracy and welfare in East Asia. A major democratic model now seems to be crumbling, a model that for Taiwan was also a source of ideas, political defense, cultural sympathy, a market for exports and a source of high-tech imports. It is in this manner that political economies shift and then falter. And when any political regime can blame any external force for their failure (which is often enough warranted), it does then lead the way as a simple excuse for more conservative and restrictive policies in the home economy, justified as a necessary reaction to untoward negative externalities.
However, moving from political economy to history, there lies another major fear. The rise of protectionism since the 19th century has been strongly associated with the development of right-wing and fascistic regimes. In Europe in the 1930s it was recession (actually a much more biting and dramatic depression) that led to a general rejection of “establishment” institutions in Spain, Germany and Italy. Note this expression “establishment” to denote the enemy as used so very frequently by both the Trump movement and by US electors interviewed by foreign media in the past few days. This is not at all healthy for either mature or budding democracies given a continuation of general global recession through the present.
So, for Taiwan, Trump’s success does not necessarily mean much in terms of a direct threat. For instance, it is not known whether his filibustering could lead to abandonment of Taiwan as a strategic case for US concern and protection. It is not known how far he will tone down generally or be ushered and controlled by more sophisticated advisers. However, some new commercial problems can now be expected. Taiwan might now have to turn more seriously to greater independence in high-tech production, new markets in the south and new approaches to the “China problem” as Trumpland unfolds over the next four years.
Ian Inkster is a professorial research associate at the Center of Taiwan Studies, SOAS, University of London and editor of the international journal History of Technology.
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