For the past week, commentators have almost universally framed US President Donald Trump’s “liberation day” as an economic Armageddon. So have investors; reeling financial markets have resulted in a 90-day pause on most of the new tariffs, with the important exception of those imposed on China.
However, people have fallen into a narrative trap if their only choice is between liberation and Armageddon. Both narratives assume “endism”: one era — and all its characters, ideas, and institutions — would be replaced by another. For Trumpians, this is a heroic story about a savior, unrestrained by old norms, who would deliver American greatness. For critics, it is a tragic story of loss, dominated by malevolent characters pursuing their own private interests over the common good.
However, endism is not the only way to frame the current crisis. There could also be an opportunity to renew and reform the world order, but only if we change the script. Liberation day was a shock, but what kind? Some shocks lead to collapse, others cause malaise but do not bring the system down, and still others lead to renewal. Right now, the collapse narrative is dominant, but that could change.
Many are likening the Trump shock to the anti-globalism that underpinned the Great Depression. However, the parallel to the 1930s should not be pressed too hard. The global system was more fragile then than it is now, with far fewer instruments to prevent disaster. After World War I, the US emerged as the global banker, but this status rested on an overheated, under-regulated, brittle domestic banking system. When the 1929 financial crisis came, it unleashed a bankruptcy wave that sent unemployment rocketing toward 9 percent. Then protectionists piled on and turned a crash into a depression.
After the Tariff Act of 1930, introduced by former US senator Reed Smoot and former US representative Willis Hawley, and reluctantly signed by former US president Herbert Hoover, jacked up US tariffs, the US’ trading partners reciprocated, and markets tanked. The multilateral trading system of the era, overseen by a feeble League of Nations in Geneva, was finished. Within two years, US unemployment topped 23 percent.
Ever since, Smoot-Hawley has become a watchword for economic idiocy, and Trump’s critics cannot resist invoking it. However, doing so ignores other crises that might point to alternative narratives. It also misses a crucial irony: One outcome of the Great Depression was the establishment of buffers and guardrails to prevent another collapse. Those instruments, burnished and updated through many financial upheavals since 1945, did indeed create a more resilient system. Moreover, what happened in finance also applied in global health, security and cultural awareness.
While pointing to the Great Depression favors calamity narratives, another storyline is almost as dangerous, because it usually kicks in only after the voices of doom have gone hoarse. This is the “muddling through” narrative, which tends to be most favored by crisis managers, who just want to get back to business as usual. One can already see it taking shape as trading partners line up at the White House or Mar-a-Lago to strike a deal. Many would offer to pay tribute to the scowling aggressor to prevent escalation, offering concessions like the creation of a “fentanyl czar” or a promise to buy Iowa corn. We could hear the muddlers’ collective sigh of relief on April 9, when Trump paused liberation day.
Muddling through is what happened during the 2008 financial crisis. At first, alarmists warned of a repeat of 1929, but the global managerial class had the tools to stave off a collapse. The situation became what one political scientist called a “status quo crisis”: severe enough to impose a toll on millions of homeowners, Greeks and Ukrainians, but not to force systemic reform. In the event, the managerial class relied on cheap credit (quantitative easing) and cheap carbon (thanks to shale energy and liquefied natural gas) to fuel a recovery, the price of which has now come due.
Muddling through looks effective at first (recall all the executive bonuses handed out in 2009), but fails to address the root of the problem. What we needed after 2008 was a course correction in globalization — a renewal of the global compact to make it fairer and more inclusive. Obviously, that did not happen.
Muddling through worked until 2016, when Brexit, Trump’s first election, Russian President Vladimir Putin’s weaponization of energy interdependence, and COVID-19 pandemic-era “vaccine nationalism” left Davos Man no muddle room. Globalists’ legitimacy has been draining away ever since.
Are we repeating century-old errors, nudging a crisis into a collapse? Are we about to muddle through again? Or could this moment be a renewal, spurred by recognition that the earlier model of globalization was not working for enough people?
The renewal narrative has been crowded out, but history is full of such moments. World War II led to the dismantling of empires and the making of a new world order. The collapse of the Soviet Union spurred democratization in many parts of the world, new human-rights norms, and efforts — limited as they were — to take the environment and climate change seriously.
The world order was in trouble well before the rise of Trump. Nuclear proliferation was back, inequality was rising, pledges to reduce greenhouse-gas emissions were in retreat and the global trading system was adrift. The Doha Round of trade negotiations ended in ignominy, and the WTO’s charter became obsolete. If we limit ourselves to patching up this flawed interdependence, we would join the post-2008 muddlers.
The world needed renewal before liberation day, and it needs it even more now. As misguided as Trump’s trade warfare is, it does not have to lead to collapse or another Pyrrhic victory for the managerial class. The path to renewal begins with more creative thinking. We should focus on the globalization we need. Attempting to rescue “status quo” globalization or to accept the White House’s caricature of US supremacy are not the only options. By favoring calamity over possibility, they are both dead ends.
Jeremy Adelman is director of the Global History Lab at the University of Cambridge.
Copyright: Project Syndicate
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