The US has definitely gone rogue in the medium term. I'm not sure about the long term (i.e.>4 years.)
I was amazed at how little damage Bush the Lesser did to the reputation of the US. Everybody--individuals, firms, and countries--wants to believe that there is an omnipotent and more-or-less benevolent Daddy somewhere. People are willing to cut the US a lot more slack than it deserves because it fills this psychic role. Hence, Obama got his Nobel for not being Bush.
Bush the Lesser continued to colour between the lines with regard to international norms. No institutions, formal or informal, were destroyed. Trump is attacking the institutions that maintain those norms. If, by cutting the US more slack than it deserves, you mean waiting patiently until normal service is returned, then people will be waiting a long time. The US is seen as the lead nation by fewer and fewer nations, with the decline really kicking in during Bush 2s administration. But international order and institutions that supported it didn’t change much, for want of an alternative acceptable to the ruling wealthy elite. The question now is, whether this elite will reach an accomodation with Trump or attempt to reassert the (still?) existing order. History tells us that it will be the former, but either way the rest of us and the environment we live in are stuffed.
“The US, as we knew it, is gone and won’t be back any time soon.”
I have entertained the view that Trumpism is merely the tearing away of the facade that hid the power of the oligarchs, and that things can continue as normal with greater awareness of reality and therefore the ability to deal with it. To rephrase the above quote “The US is now revealed as it truely is and we can’t fool ourselves that it’s institutions of freedom and democracy were ever strong enough to keep the power of the oligarchs in check, let alone reassert themselves after being torn down by Trump.”
As I wrote that last bit, I felt a bit queasy as the reality hit home. But this view is only partly right in that independent courts, freedom of association and freedom of speech remained largely intact not just because it was part of the facade but that they were maintained by governments that were of the people, for the people, by the people, although to an rapidly declining extent.
To the extent that ordinary people (non billionaires) were aware of this decline, enough of them voted for Trump out of the cynical view that at least the lack of democracy is obvious now.
But what has really changed? What foreign or domestic polices are advisable now that were not already? The only one I can see is maybe to raise the FAIT (US terminology) on the supposition that there will be a higher level of "average" shocks that the economy will be exposed to.
Media platforms? Not my expertise, but a progressive excise tax on advertising aimed at "engagement" looks good to me but it did before, too.
What prospects do you see for international economic cooperation in this new geopolitical environment? Which countries should Australia be targeting in its efforts to strengthen its international relationships, if the US can no longer be trusted to behave like a rational actor?
It's unusual that I disagree with your conclusions as much as I do here.
While I agree we should reduce our reliance on the US and China, this doesn't call for self-reliance, just more careful decisions about who we build relationships with. In metaphorical terms, the only key allies we've ever had have been our high school sweethearts (the UK) and the first person who came along when that lost it's lustre (the US).
We've taken New Zealand and Japan for granted and failed to put any serious work into Indonesia. There may also be opportunities in Europe which have never been properly developed. Similarly, Australia has failed to pull its weight in global aid.
It's also always true that "the government should be preparing plans for fiscal stimulus". Any competent government must be prepared for economic storms, no matter how sunny the weather. But that's a purely academic argument in the current political climate.
Finally, any discussion of interest rates is a bum steer. The material wellbeing of Australians, and many other people, is declining for fundamental economic reasons, not because of monetary policies. The global exception is the United States, which is burning the candle at both ends and I think it's absurd to envy them their growth unless you'd also like deficits of 6%of GDP and soaring inequality.
As regards our dependence on US and Chinese AI (the subject of my proposal for self-reliance), who would you suggest as alternatives to developing our own capacity?
If DeepSeek delivers on its promise of cheap, accessible AI, we could get our AI from anywhere, off the shelf. I guess generalising from AI to cloud services, I can see that we are pretty well positioned to become self-sufficient, being geographically isolated and rich in energy. But even then, we're more likely to use foreign technology than to reinvent the wheel here.
You seem to be framing all this in terms of C20 arguments about free trade in goods. That's not the right way to think about the information economy. The point isn't comparative advantage, it's who has access to information. Information is a non-rival good, so standard trade theory has nothing to tell us ehere
I know this government is on its last legs but IF they did win the upcoming election (I'm speaking here as someone from a non-economics background:) couldn't they give a focus to the Future made in Australia policy and invest in the manufacture of vaccines and medical devices? It would make Australia less dependent on others, lead to us developing more sophisticated research and manufacturing and also assist in providing aid to counties which need it, especially now that the US has abandoned them.
We could, but only at the expense of things we're already good at. That's generally true, but especially so with 4% unemployment, a number which indicates we have no spare capacity for competing with countries that are much better than us at stuff like manufacturing.
I'm not opposed to industrial policy entirely - the green iron idea is an interesting one - it must be thought through.
I was just trying to think of things we're already good at and the first thing was - digging up raw materials and shipping them overseas to be processed.
Historically, things 'Made in Japan/China' were looked down on as being cheap or second rate but their manufacturing and technology are now highly advanced.
Perhaps it comes down to finding a niche where we could excel. In practical terms, with global warming there will be more viruses and diseases advancing further south (and north) of the Equator. Australia does have the research capabilities and possibly more students choosing STEM subjects so manufacturing of vaccines might be a logical next step.
Well said, John. I wish I could be optimistic that this pretty straightforward and obvious advice would be taken, but the complacency and incompetence of our political elites is regrettably well understood.
John, I just wanted to acknowledge that you are one of the very few economists, along with Paul Krugman who recognizes how (potentially) bad things will get.
I listen to a few other economics related podcasts & they seem to think, the rhetoric from Trump is empty threats & that "he won't actually do it" kind of attitude come through in a lot of them. Whilst people are open to their own opinions, I do think holding onto this belief that it will be more or less business as usual will prove to be detrimental for all of us.
This is what a post-neoliberal world looks like. All those clamouring for it are getting what they wanted and getting it hard.
Ouch. I hate to think that neofuedalism is our only alternative.
The US has definitely gone rogue in the medium term. I'm not sure about the long term (i.e.>4 years.)
I was amazed at how little damage Bush the Lesser did to the reputation of the US. Everybody--individuals, firms, and countries--wants to believe that there is an omnipotent and more-or-less benevolent Daddy somewhere. People are willing to cut the US a lot more slack than it deserves because it fills this psychic role. Hence, Obama got his Nobel for not being Bush.
Bush the Lesser continued to colour between the lines with regard to international norms. No institutions, formal or informal, were destroyed. Trump is attacking the institutions that maintain those norms. If, by cutting the US more slack than it deserves, you mean waiting patiently until normal service is returned, then people will be waiting a long time. The US is seen as the lead nation by fewer and fewer nations, with the decline really kicking in during Bush 2s administration. But international order and institutions that supported it didn’t change much, for want of an alternative acceptable to the ruling wealthy elite. The question now is, whether this elite will reach an accomodation with Trump or attempt to reassert the (still?) existing order. History tells us that it will be the former, but either way the rest of us and the environment we live in are stuffed.
“The US, as we knew it, is gone and won’t be back any time soon.”
I have entertained the view that Trumpism is merely the tearing away of the facade that hid the power of the oligarchs, and that things can continue as normal with greater awareness of reality and therefore the ability to deal with it. To rephrase the above quote “The US is now revealed as it truely is and we can’t fool ourselves that it’s institutions of freedom and democracy were ever strong enough to keep the power of the oligarchs in check, let alone reassert themselves after being torn down by Trump.”
As I wrote that last bit, I felt a bit queasy as the reality hit home. But this view is only partly right in that independent courts, freedom of association and freedom of speech remained largely intact not just because it was part of the facade but that they were maintained by governments that were of the people, for the people, by the people, although to an rapidly declining extent.
To the extent that ordinary people (non billionaires) were aware of this decline, enough of them voted for Trump out of the cynical view that at least the lack of democracy is obvious now.
But what has really changed? What foreign or domestic polices are advisable now that were not already? The only one I can see is maybe to raise the FAIT (US terminology) on the supposition that there will be a higher level of "average" shocks that the economy will be exposed to.
Media platforms? Not my expertise, but a progressive excise tax on advertising aimed at "engagement" looks good to me but it did before, too.
What prospects do you see for international economic cooperation in this new geopolitical environment? Which countries should Australia be targeting in its efforts to strengthen its international relationships, if the US can no longer be trusted to behave like a rational actor?
It's unusual that I disagree with your conclusions as much as I do here.
While I agree we should reduce our reliance on the US and China, this doesn't call for self-reliance, just more careful decisions about who we build relationships with. In metaphorical terms, the only key allies we've ever had have been our high school sweethearts (the UK) and the first person who came along when that lost it's lustre (the US).
We've taken New Zealand and Japan for granted and failed to put any serious work into Indonesia. There may also be opportunities in Europe which have never been properly developed. Similarly, Australia has failed to pull its weight in global aid.
It's also always true that "the government should be preparing plans for fiscal stimulus". Any competent government must be prepared for economic storms, no matter how sunny the weather. But that's a purely academic argument in the current political climate.
Finally, any discussion of interest rates is a bum steer. The material wellbeing of Australians, and many other people, is declining for fundamental economic reasons, not because of monetary policies. The global exception is the United States, which is burning the candle at both ends and I think it's absurd to envy them their growth unless you'd also like deficits of 6%of GDP and soaring inequality.
As regards our dependence on US and Chinese AI (the subject of my proposal for self-reliance), who would you suggest as alternatives to developing our own capacity?
If DeepSeek delivers on its promise of cheap, accessible AI, we could get our AI from anywhere, off the shelf. I guess generalising from AI to cloud services, I can see that we are pretty well positioned to become self-sufficient, being geographically isolated and rich in energy. But even then, we're more likely to use foreign technology than to reinvent the wheel here.
You seem to be framing all this in terms of C20 arguments about free trade in goods. That's not the right way to think about the information economy. The point isn't comparative advantage, it's who has access to information. Information is a non-rival good, so standard trade theory has nothing to tell us ehere
I know this government is on its last legs but IF they did win the upcoming election (I'm speaking here as someone from a non-economics background:) couldn't they give a focus to the Future made in Australia policy and invest in the manufacture of vaccines and medical devices? It would make Australia less dependent on others, lead to us developing more sophisticated research and manufacturing and also assist in providing aid to counties which need it, especially now that the US has abandoned them.
We could, but only at the expense of things we're already good at. That's generally true, but especially so with 4% unemployment, a number which indicates we have no spare capacity for competing with countries that are much better than us at stuff like manufacturing.
I'm not opposed to industrial policy entirely - the green iron idea is an interesting one - it must be thought through.
I was just trying to think of things we're already good at and the first thing was - digging up raw materials and shipping them overseas to be processed.
Historically, things 'Made in Japan/China' were looked down on as being cheap or second rate but their manufacturing and technology are now highly advanced.
Perhaps it comes down to finding a niche where we could excel. In practical terms, with global warming there will be more viruses and diseases advancing further south (and north) of the Equator. Australia does have the research capabilities and possibly more students choosing STEM subjects so manufacturing of vaccines might be a logical next step.
Well said, John. I wish I could be optimistic that this pretty straightforward and obvious advice would be taken, but the complacency and incompetence of our political elites is regrettably well understood.
John, I just wanted to acknowledge that you are one of the very few economists, along with Paul Krugman who recognizes how (potentially) bad things will get.
I listen to a few other economics related podcasts & they seem to think, the rhetoric from Trump is empty threats & that "he won't actually do it" kind of attitude come through in a lot of them. Whilst people are open to their own opinions, I do think holding onto this belief that it will be more or less business as usual will prove to be detrimental for all of us.
Most of the world is taking that attitude.
AFAICT it’s a coping mechanism. The breakdown of the USA is not something most people are remotely equipped to contemplate.