Donald Trump and global order: disruption or continuity?

The picture is reassuring. The Ministers of Finance of the twenty largest economies in the world, together with the Managing Director of the IMF, display a perfunctory smile.

But despite this reassuring impression, the G20 Finance Ministers meeting that was held in Baden Baden, in Germany, marks the end of an era. It signals a departure from a long standing consensus of neo-liberal multilateralism, which for all its rhetoric and assurances, never managed to tackle the structural imbalances of the global economy.

The G20 Ministerial meetings were initiated in 1999, almost a decade before the first G20 Heads of State meetings was held in Pittsburgh in November 2008. It was a direct response to the Asian crisis of 1998, and to the critics that were formulated at that time regarding the lack of coordination of the G8 with the largest emerging economies – China, India, Indonesia or Brazil – when dealing with the consequences and contagion effects of this major crisis.

Incidentally, the creation of the G20, at the ministerial level, coincided with the launch of the Doha Round of the World Trade Organization (WTO) in 2001. The later was seen as a further commitment of the Western economies – especially the United States and the European Union – to grant more bargaining power to the largest emerging economies, in order to convince them of suppressing the remaining barriers to international trade and cross-border investment.

Nevertheless, in what was the Trump’s Administration first participation in a G20 meeting, this liberalization mantra was suddenly abandoned. Indeed, the new Administration made it clear, that it did not want to condemn protectionism and to endorse free trade in the official communique that was published at the end of the meeting. Beyond the battle of words, what is really at play is a rejection of a long standing consensus in favor of « laissez faire » and of a benign – toothless so to say – multilateralism.

The commitment to free trade has been an essential pillar of the Pax Americana established in the Post-WWII period, and extended to the entire world following the collapse of the Soviet Union.  Even the 9-11 attacks did not divert the United States from their commitment to this fundamental principle. And here comes a US President that threatens to shatter the very foundations of the so-called Washington consensus!

It is fair to acknowledge that the tendency toward more protectionism is not proper to the United States. In Europe too, advocates of protectionism are gaining the upper hand. Brexit is a dramatic illustration of this sweeping wave, as are the economic sanctions against Russia, which are nothing but a convenient way of weakening and circumventing a renascent economic and military power. The general tendency toward protectionism is a direct consequence of the Great Recession of 2008. Although it did not impact the Western economies as badly as the Great Depression of 1929, the 2008 crisis was a major turning point. It revealed and magnified the structural vulnerabilities of every major Western economy and trading bloc.

I analyzed at length in my book on the BRICs published in 2011 (in French), the consequences of the 2008 crisis, and its role as a catalyst for the rebalancing of the global economy away from a US-centered « core-periphery » model. This structural rebalancing was somewhat oveshadowed by the insistence of former US President Barack Obama on preserving the liberal-wilsonian world order. For all its cosmopolitan phrasé and inclusiveness, this was a essentially a message sent to the American elites and their allies in Western Europe, Japan and in the Gulf’s Petro-monarchies. The message was that whatever it would cost them, the United States would not retreat from their role as a global Hegemon.

Against that background, Donald Trump’s overtly isolationist and protectionist rhetoric may seem surprising at first. However, it is a logical reaction to the failure – from Trump’s point of view – of Barack Obama’s liberal agenda both at home and abroad. Obama failed indeed to demonstrate to the American grass roots constituencies  that « what was good for the world was good for America ». In turn, Trump rejected this nexus and returned to a more conservative « America first » vision, which intends to preserve the United States from the vagaries of global politics and to insulate them from real or perceived threats to their national security and to the American way of life.

The adherence of Donald Trump to a harsher – some would say more realistic – vision of international relations, structured around national interest and the foe/friend opposition, comes together with an implicit recognition of the decline of US power, and of its diminishing capacity to shape the global agenda. It goes without saying that the United States will retain a major role in the world over the coming decades. This is both in the interest of their allies and in their own national interest. Indeed US prosperity hinges on  their military projection capabilities, and on the international acceptance of the US dollar as the world’s reserve currency. However, it is clear that there is an ongoing shift of consensus inside the United States, and that Americans are no longer willing to bear alone the heavy burden of an intricate web of economic and military alliances dating back to WWII and to the Cold war.

By this standard, the Trump Administration does not represent a disruption. It marks the return to a secular trend that was initiated as far back as in 1971 when President Richard Nixon decided unilaterally to put an end to the dollar standard. This is all the more true that the world has dramatically changed since then, and that the center of gravity of the global economy has shifted away from the United States.

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