Economical Consequences of Trump Presidency

10 November 2016

Focus of the media during the course of the election campaigns on the personality of the two contenders diverted the attention of people on the more important issues such as economical consequences of their policies. Here we try to look at the policies of president elect Trump and the national and global consequences of them.

Economical policies of President Elect Trump are a mixture of Keynesian economics policies and protectionism.

English economist John Maynard Keynes during the 1930s advocated increased government expenditures and lower taxes to stimulate demands and pull the global economy out of depression.

Protectionism policies are a feature of the world economy prior to second world war and in fact responsible for the war. These policies would put barriers to free movement of goods and capitals and hence leads to adoption of similar protectionist policies by other countries and eventually paralyses free world trade. This is a completely opposite policy to what Americans themselves helped creating after second world war, a policy which helped cooperation and amalgamation of the economies of major industrialised countries safeguarding peace and cooperation on both sides of the Atlantic and Pacific oceans.

The suggested allocation of $600 billion for infrastructure activities such as building roads,tunnels, bridges etc and massive tax reductions to the extent of $4 trillion to stimulate the economy would require printing dollars to an unprecedented extent which would increase inflation and decrease the value of dollar. There is no doubt that investment in infrastructure of the country is beneficial to trade and prosperity but if it is done excessively without careful study of the economical benefit of each one of the projects it would lead to inflation and waste of the resources.

The dramatic decrease in the value of dollar as a result of excessive printing of it would also create a panic among all the countries which keep dollar as a currency reserve and that would lead to panic selling of dollar in the world currency market and further reduction of its value. This can completely upset the world economy and lead to a very long lasting worldwide depression.

Farzad Vahid