Economy

‘This is a good day for America,’ said President Bill Clinton on May 24, the Year of Our Lord 2000. ‘In 10 years from now we will look back on this day and be glad we did this.’ Clinton was talking about the House of Representatives’ vote to award normal trade relations to China. And he was right. By 2010, despite the crash of 2008, the knowledge class still largely considered the decision to support China’s entry into the World Trade Organization as a great boon. China’s rise had turbocharged globalization and made us all richer — never mind the stupefying sovereign debts. Labour unions had opposed it, but leaders and corporations were still enthralled by the gargantuan consumer markets.

President Trump’s decision to set the United States back on the path to work will be decried as mere politics, but it is the right decision. It is the task of politicians to consider the general welfare. This consideration sets the current emergency against the coming one, the need to reduce deaths from COVID-19 against the need to forestall the human cost of an economy in open-ended limbo. The data on COVID-19 remains insufficient and will probably remain so. The economic prognosis is, however, clearer, and we have the data too.The IMF is warning that a prolonged shutdown will lead to a Thirties’-style Depression.

The coronavirus has devastated many small businesses. Historically, ownership offered a solid if not prosperous choice for many white males, particularly in the postwar period. You can see evidence of their successes on golf courses, in retirement communities and on cruise lines. While white men still dominate the business-owning class, other demographic groups have a strong small business presence, particularly in immigrant-rich cities like New York. These groups are especially vulnerable to the economic impact of the coronavirus lockdown.The black business community has expanded substantially in recent years. The latest comprehensive government statistics, from 2012, estimate that there was a one-third increase from the census of 2007.

White House trade adviser Peter Navarro is hitting back at a group of Big Pharma lobbyists, medical organizations, and free trade groups for opposing President Trump's proposed 'Buy American' executive order reshoring the medical supply chain. Navarro, the assistant to the president for trade and manufacturing, told The Spectator that Big Pharma's opposition to the executive order, which would require government agencies to purchase pharmaceutical products made in the US, because it wants to 'preserve its offshore oligopoly'. 'All the EO would do is ensure that government agencies, including the VA, HHS, and DoD, Buy American,' Navarro said.

The Association for Accessible Medicines (AAM), a trade association for major pharmaceutical manufacturers such as 3M, is drafting a letter to send to President Trump opposing his proposed ‘Buy American’ executive order reshoring medical supply chains. The letter currently has over 40 signatories, including PhRMA, a Big Pharma lobbying organization, dozens of medical nonprofits, and free market-oriented organizations, indicating the president will face immense pressure across the political spectrum for trying to reduce US medical dependence on China. AAM claims that signing the 'Buy American' executive order during the coronavirus crisis will harm efforts to provide doctors and hospitals with the equipment and medicines they need to stop the spread of COVID-19.

We are living through a gruesome case study in the irrationality of elites. COVID-19 is a serious disease, but the question of just how serious it is has hardly even been posed correctly, let alone answered intelligently. Yet already our leaders have assumed dictatorial airs and enacted policies that threaten to plunge the Western world into an economic crisis unmatched since the Great Depression. Eighty days into 2020, the official worldwide death toll from the coronavirus stands at somewhat over 10,000 lives. That includes fatalities from the final months of 2019 as well, when Chinese authorities initially tried to disguise rather than treat the outbreak of the new disease. The world was utterly unprepared for the virus as it spread from Wuhan.

The first casualty of informational war is truth. The first American casualty of COVID-19 was the myth that the United States can ‘manage’ the rise of China as a world power through mutual interest. That mutual interest was only ever economic. Naturally, most of our politicians, business leaders and commentators explained it as strategic too: as technocracy calls GDP the index of human happiness, so it identifies strategic interests with economic ones. The coronavirus crisis has, however, exposed an essential strategic antagonism between the United States and China.'‘What made war inevitable was the growth of Athenian power and the fear which this caused in Sparta,’ Thucydides wrote in History of the Peloponnesian War.

The first victim of war, they say, is truth. The first victim of coronavirus, by contrast, is fiscal discipline. Yesterday, President Trump started negotiating with the Senate over a proposal to suspend payroll taxes, possibly until the end of the year. Wall Street certainly liked it: markets shot up by five percent. Whether future Americans will enjoy paying the bill is another matter. The government’s proposal is not just targeted help for a few industries like travel and tourism, which stand to lose out heavily as people stay at home. It is not a modest tax cut to encourage Americans to go out and spend a little more. Even to call it a 'stimulus package' — as these things are pat to be called — seems pathetically inadequate.

Is this really about a virus? Oil has plunged 30 percent, the S&P Index seven percent. What is happening on the markets today has less the feel of a rational reaction to world events than one of the periodic panics which grips world markets — with coronavirus a mere excuse for a sell-off which was perhaps coming anyway. The deadliest words for world markets are not ‘coronavirus’ and ‘Covid-19’ but ‘decade-long bull market’. The latter idea has planted in many investors’ heads that the good times could not have gone on much longer — there had to be a correction or crash. It is true, as well, that the US, in common with many developed countries, has not suffered a recession for over 10 years. That, too, feels unnatural.

So farewell Bernie Ebbers, former chief executive of WorldCom, the long-distance phone operator that became America’s biggest-ever bankruptcy case in 2002. Ebbers has died aged 78, having been released on health grounds in December from a 25-year jail sentence for his part in an accounting fraud that concealed the perilous state of WorldCom’s finances, misleading investors after a series of high-risk acquisitions by the bejeweled ‘telecom cowboy’ Ebbers during the dotcom boom. By repute, US justice aims to make examples of high-profile corporate miscreants, starting with the humiliating ‘perp walk’ into court and concluding with harsh sentences and scant hope of parole.

This article is in The Spectator’s February 2020 US edition. Subscribe here. The US-China trade war is easing; a new trade deal with Canada and Mexico has been passed by a large cross-party majority in the House of Representatives — largely unnoticed, as it happened in the same week as Donald Trump’s impeachment. The idea that the president is taking the world down a blind alley toward an era of protectionism is beginning to fade. So what now of the prospects for that other trade deal that Trump has promised: between the US and Britain?

There is no shortage of quotes by Donald Trump that his opponents have tried to use against him — few of which have so far damaged him politically, still less embarrass the man himself. But there is one which really does have the potential to cause him harm in this year’s presidential election: his claim, in March 2018, that ‘trade wars are good, and easy to win’. That isn’t looking quite so clever now, two years later when the trade war that Trump started with China is still far from won. The deal signed today by Trump and Chinese vice premier Liu He brings a respite in hostilities, but there is a long way to go before the US can be claimed to have won, or even to have restored trade to what it was prior to 2018.

Just when you thought it was safe to go back in the water…late last year, a range of forecasts suggested that the likelihood of recession in the US, with knock-on effects for the rest of the developed world, had significantly diminished. Last summer, many economists were putting the chance of a substantial downturn at 50 percent but by November, Goldman Sachs had marked it down to 24 percent and Morgan Stanley to ‘around 20 percent’. Underlying this shift were strong corporate earnings and consumer spending, plus rising hopes of a settlement of US-China trade tensions. Last month saw a sell-off of safety-first government bonds reflecting the mood, and the FT’s end-of-year forecasts included a confident ‘No’ to ‘Will the US go into recession?

If Donald Trump wanted to deliver a seasonal gift to his ‘good friend’ Xi Jinping, the ‘Phase One’ trade deal reached this weekend fits the bill pretty well.  From the viewpoint of the Beijing leadership, it vindicates the Chinese refusal to budge during the long months of trade negotiations despite the threat of escalating duties. What has resulted is less the kind of overall trade agreement originally aimed at by the Trump administration and feared by China as interference in its economy —  and more of a purchase agreement accompanied by reduced tariffs.

Ever since Donald Trump began his trade war with China there have been two possibilities: firstly, that he intends tariffs to form a permanent feature of the landscape in relations between the US and China: a protectionist device designed to protect American jobs indefinitely; or secondly, that he sees his tariffs as a shock tactic devised to draw China into talks which it would otherwise be loathe to join, and with the ultimate aim of freeing up trade. The latest development, halving a set of tariffs which had been in place since September and canceling another set which had been due to come into place this week, points heavily to the latter.