The last time Donald Trump was in office, the world was in the midst of a global pandemic, and the cost of living was fast moving north, both at home and abroad.
Years of neoliberal order, if already had not shown enough cracks during the Global Financial Crisis (GFC) 2007-08 in terms of weaknesses in building a more resilient, and equal world, had given all the more reason to revisit this disorder, given preponderance of market fundamentalism over greater role of public sector, and industrial policy had presented a very weakly-prepared world when the Covid pandemic hit.
Hence, may that be in terms of vaccine apartheid, misuse of intellectual property rights (IPRs) with regard to vaccine manufacturing, lack of timely availability of International Monetary Fund’s (IMF’s) special drawing rights (SDRs) allocation (specially towards countries in the global South, including Pakistan, facing difficult balance of payment, climate finance, welfare spending, and debt sustainability situation), lack of production capacity domestically in countries in general, and weak supply chains globally as a result of years of weakly regulated markets allowed following short-sighted profit signals, overtaking policy decisions that enhanced productive, and allocative efficiencies.
Four years on while there is a semblance of reined-in inflation in both developed and developing countries in general, yet huge challenges still remain. Firstly, the drop in inflation rate took a lot of time even after practice of strong austerity policies, which meant that focus on squeezing aggregate demand was a lot more than improving the supply side.
Hence, while cost of living has significantly risen over the last few years, real incomes on average have seen very little increase over the same period. That is one of the main challenges Trump will face at home, while taking lead on rolling back the neoliberal order both at home, and in the realm of multilateralism, especially in terms of the reform of IMF and World Trade Organization (WTO).
Secondly, climate change crisis, and closely related to it the ‘Pandemicene’ phenomenon, and together with the challenges indicated above, among possible others like enhancing political voice through reducing inequality, all mean that a world of polycrisis awaits the second term of Trump; not to mention a very difficult situation he will face in terms of geo-political conflicts in the Middle East, and in terms of the war in Ukraine.
To his advantage, President-elect Donald Trump will now have a lot more authority as compared to what he had during his previous term between 2017 and 2021. Ease in terms of passage of legislation given Republicans have majority in Congress – both Senate, and House of Representatives – along with having the popular vote on his side.
Among his first orders of business, in terms of giving some urgently-needed respite to countries stuck in heavy burden of debt indebtedness is to go for passage of legislation that allows for enhancing the envelope of SDRs available with IMF at $650 billion, and for not only immediately calling for a one-time allocation of SDRs for countries to deal with debt stresses in the wake of spending needs generated by the pandemic – given the allocation of a similar nature back of August 2021 has been quite a long time ago – but also for creating a window whereby climate change related SDRs are allocated to highly climate- challenged countries on an annual basis, at least over the medium term.
In addition, Trump should initiate a serious discussion on significantly improving the global debt restructuring framework, and in reforming the Bretton Woods institutions away from their strong neoliberal basis, which means, for instance, asking IMF to plan a shift out of its ‘structural adjustment’ policies, for WTO to lower the walls of patents, and IPRs – especially in the case of life-saving drugs and vaccines, in particular those that had a lot of public sector spending contribution – and in bringing back the role of public sector, and reining in the role of market fundamentalism, and the virtual parliament in the shape of virtually unhindered flow of ‘hot money’ strongly affecting domestic economic policies anywhere and everywhere.
The world needs strong leadership role to be played, given the existential threats, and the heightened level of human misery – from rise in absolute poverty globally to climate change related disasters, and lack of timely resolution of geo-political issues, including the more chronic ones, not to mention the scars from pandemic times like the practice of vaccine nationalism that accentuated the divide between global North and South internationally, and increased the gap between the two sides due to late start of economic recovery in general in the South.
As the President in waiting, Donald Trump rightly alluded to the needed ‘healing’ touch; it is, however, important that it is not only extended domestically but also globally.
Moreover, the existential threat of climate change, and the fast-closing window of meeting the needed targets of global warming to keep global average annual temperature below 1.5C, it is important that strong leadership is provided by Trump, the G-7 group of countries, and more broadly.
Copyright Business Recorder, 2024
The writer holds a PhD in Economics degree from the University of Barcelona, and has previously worked at the International Monetary Fund. His contact on ‘X’ (formerly ‘Twitter’) is @omerjaved7
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