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      in US Politics

      What led to Trump and what will follow Biden | Letters

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      George Monbiot (The US was lucky to get Trump – Biden may pave the way for a more competent autocrat, 11 November) is probably right about Barack Obama paving the way for Donald Trump, because the former failed to tackle big business. I would go even further and say that Tony Blair, another “breath of fresh air” at the time with his Tory-lite policies, more or less paved the way for our Trump – in the form of Brexit.Both politicians had a clear electoral mandate to bring about fundamental changes to their societies: in Blair’s case, to change our parliamentary institutions, as, when it came to corralling business, the UK was very much, and still is, a bit-part player. In the end, his successor handed over a poisoned chalice to the Tory/Lib Dem coalition to attempt to clean up the mess and, after its failure, to face the consequences. Joe Biden, besides confronting neoliberalism, needs to do to his country’s political system what Blair failed to do to his. John MarriottNorth Hykeham, Lincolnshire• George Monbiot paints a bleak prospect for the US and, by implication, the rest of the free world. He writes at length about the failure of Barack Obama to change the basic course of social and economic conditions during his eight years in office. He also comments on how important it is that Democrats win both Senate seats in Georgia to avoid a Republican-led upper house. Surely it was exactly this that stopped Obama at every turn – the fact that during his presidency he was cursed with a hostile and belligerent Senate.The 2008 global financial crisis was one of his darkest moments, and I believe it was Gordon Brown who took charge of the initial recovery worldwide. Most politicians realised that it was senior bank staff who were responsible for the disaster. But as the old adage says, “If you owe the bank £100 then you have a problem, but if you owe the bank £10,000,000 then the bank has a problem.” They were just too big and important to be allowed to fail. What didn’t happen, but should have, was that no bankers were exposed and prosecuted. Both Obama and Brown must bear some of the criticism. Richard YoellBromham, Bedfordshire• I am appalled by the advocation of “tub-thumping left populism” as a way forward for the US. We have seen enough of tub-thumping populism (whether of the left or right) in the world during the last 100 years to know where it leads – to mass civil unrest, police brutality, military intervention, civil war, governments shutting down parliaments and locking up (or kidnapping and murdering) political opponents. In short, to unbridled anarchy, tyranny and mayhem. So thanks, but no thanks! For all its faults and weaknesses, I’ll stick with democracy based on free and fair elections, even if it doesn’t always lead us to the ideal society that we may yearn to see realised.Philip StenningEccleshall, Staffordshire• George Monbiot overlooks the way in which the neoliberal doctrine of “making wealth before welfare” has been massively overturned by the response to the Covid-19 crisis, where the primacy of health over economics has been forced on even the most ardent neoliberal regimes, not least in the UK. This will certainly leave an indelible mark on the post-pandemic era. Unlike the disastrous neoliberal response to the 2008 crash, this time we are seeing the start of a possible end of its dominance as the prevailing ideology of our times, for the first time since the Thatcher-Reagan years.Adam HartGorran Haven, Cornwall More

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      in World Politics

      In Asia, a New Kid on the Trade Bloc

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      History undergoes serious change thanks in particular to slow events that fly below the media’s radar. Focusing on dramatic, immediate events, the media tends to neglect the major shifts that unfold over time. Paradoxically, slowly developing events that often go unreported tell the true story of history. Most often, the exciting, explosive events that dominate the news merely serve to accelerate longer-term trends.

      There is a simple scientific reason for this. Systems react immediately to dramatic events that occur quickly and unexpectedly. They typically mobilize their defenses to improvise a rapid reply. Rather than signaling change, such actions serve to protect and reinforce the status quo.

      The 9/11 attacks, clearly the most dramatic event of the past two decades, provoked a massive response from the US government. The effort to oppose the emergence of the new shape of terrorism appeared to mark a decisive shift in contemporary political history. The response consisted of a global military alliance intent on defending the prevailing “rule of law” and the elaboration of a powerful security state.

      Will Laos Become a Model for China’s Economic Colonialism?

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      The effort piloted by George W. Bush and Tony Blair ended up simply reinforcing the focus of Western nuclear powers on the idea that sophisticated military technology provided the key for governing the world. It confirmed and consolidated the long-term trend of building the entire Western economy and culture around the American military-industrial complex.

      Distracted by a relatively meaningless transfer of power in the US following Joe Biden’s election and other colorful events such as the comic melodrama of relations within British Prime Minister Boris Johnson’s chaotic Brexit team, today’s media have paid scant attention to one event of monumental importance that took place on Sunday. The event itself was unremarkable, but it is a powerful indicator of historical change. The signing on Sunday of the act that brought Asia’s Regional Comprehensive Economic Partnership (RCEP) into existence marked a crucial moment in a slowly evolving shift that began nearly a decade ago and will have a profound impact on history in the coming years.

      In its article on the event, Al Jazeera quotes one American expert, Jeffrey Wilson, who sees RCEP as “a much-needed platform for the Indo-Pacific’s post-COVID recovery.”

      Today’s Daily Devil’s Dictionary definition:

      Post-COVID recovery:

      The idea which some people consider to be phantasy that the global economy may some day return to normal once COVID-19 is eradicated.

      Contextual Note

      The New York Times notes that RCEP has been in the plans for eight years and describes it as “designed by Beijing partly as a counterweight to American influence in the region.” In other words, this is a chapter of a story that lives within the context of a massive and continual decades-long shift of momentum in the global economy. The center of gravity of the global economy has been silently but steadily migrating from the North Atlantic following World War II on a south-eastward course toward Asia.

      Back in 2015, Reuters market analyst John Kemp pointed to the West’s failure to sense this movement, stating that “Most western policymakers and journalists view the world economy through a framework that is 10-15 years out of date.” He further points out that “India’s economy has also started to become a major source of global growth, which will ensure the centre of gravity continues to move more deeply into Asia over the next 50 years.” Analysts who have even attempted to assess the speed of the shift appear to agree on a “rate of about 100 kilometres or more per year.” It may have accelerated since 2015, and even intensified as a consequence of the implicit isolationism of Trump’s “America First” philosophy.

      Embed from Getty Images

      Fearful of the threat to US hegemony posed by the RCEP, the Obama administration launched the Trans-Pacific Partnership (TPP), designed to eclipse the RCEP and protect some of the key historical advantages that underpinned US economic hegemony. Once Trump decided to leave the TPP, the US could no longer take advantage of its provisions to protect industrial property rights or oblige other nations to respect unified labor standards.

      The US has literally been left behind in the race to define and enforce the rules that will govern commerce and economic development throughout the Asia zone over the next 50 years. Most commentators suspect that once president-elect Joe Biden is in office, he will not in the short term make an effort to catch up. In the midst of a complex health and economic crisis, there are other priorities. But Jeffrey Wilson’s comment about “Indo-Pacific’s post-COVID recovery” reveals that Asia, under China’s leadership, today has a clear head start and can set the tone for what a post-coronavirus world will look like. This is a question every nation is grappling with. There are no obvious answers. But there can be little doubt that the world that emerges once COVID-19 is completely under control or eradicated will be very different from what preceded the pandemic.

      The Times signals the fact that “to some trade experts, the signing of the R.C.E.P. shows that the rest of the world will not wait around for the United States.” Many commentators have noted that four years of Donald Trump have convinced European leaders that depending on the ideological and geopolitical framework provided by the US is too risky an engagement. It may even transpire that, despite the intensified military cooperation between India and the US directed against the Chinese threat, as reported in this column by Vikram Sood, Atul Singh and Manu Sharma, India could eventually be attracted to the RCEP. Security is one thing. A humming economy is another.

      India could, for example, be positioned to profit from a key feature of RCEP. The Times quotes Mary Lovely, a senior fellow at the Peterson Institute for International Economics in Washington, who notes that “R.C.E.P. gives foreign companies enhanced flexibility in navigating between the two giants. Lower tariffs within the region increase the value of operating within the Asian region, while the uniform rules of origin make it easier to pull production away from the Chinese mainland while retaining that access.” Narendra Modi’s India has not yet managed to fulfill its promises to expand manufacturing in India. Could RCEP be the key to providing conditions favorable to that evolution?

      In short, the world is faced with a formidable number of variables that combine in a variety of different ways. As Brexit demonstrated, today’s political alignments can be nullified in a trice as the perception of economic opportunities and the pressure of uncontrollable crises such as the COVID-19 pandemic lead to new geopolitical configurations. Those trends are far more powerful than bilateral agreements.

      Historical Note

      Asia’s Regional Comprehensive Economic Partnership will only begin to produce practical effects two or three years down the line. But it already opens channels of communication and coordination between fifteen countries. This will not only confirm the shift of the global economy’s center of gravity but also accelerate the shift toward a new power relationship between the US and China. As the recent presidential campaign highlighted, Americans tend to see this as a binary relationship. Yet all the indicators point toward a multipolar reordering.

      The Times article reminds readers of the historical situation when RCEP was first proposed: “The prospect of China’s forging closer economic ties with its neighbors has prompted concern in Washington. President Barack Obama’s response was the T.P.P.” Trump’s action upon taking office of killing the TPP before it could be signed opened the door to the eventual 15 nation agreement, with the roles of the US and China inverted. Obama designed the TPP to allow China in through the back door. RCEP is designed to allow the US in through the back door.

      The world awaits the evolution and hoped-for denouement of a series of crises nested each within the other. However painful and disruptive, these crises have the merit of signaling the existence of a common interest for all of humanity in stark contrast with the traditional model of geopolitical reasoning based on national rivalries. It is in everyone’s interest to keep our eyes fixed on the slow but deep movements of history as well as the superficial ones that the media throw in our faces every day.

      *[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book, The Devil’s Dictionary, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news. Read more of The Daily Devil’s Dictionary on Fair Observer.]

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      in Elections

      How can Joe Biden deal with Donald Trump's obstruction in transition?

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      The president-elect can learn from Franklin D Roosevelt’s response to Herbert HooverPresidential transitions are never easy, especially when they involve an incumbent president defeated at the polls. But this time the transition occurs in the midst of an unprecedented crisis. The incumbent refuses to acknowledge the vote as a rejection of his policies and has a visceral dislike for the president-elect, who he accuses of dishonesty and dismisses as too frail to assume the duties of office. He tars his successor as a socialist, an advocate of policies that will put the country on the road to ruin.The year was 1932, and the transition from Herbert Hoover to Franklin D Roosevelt occurred in the midst of an unparalleled economic depression and banking crisis. The outgoing president, Hoover, had an intense aversion to his successor, whose incapacity of concern was not any lack of mental acuity, but rather Roosevelt’s partial paralysis. He called FDR a “chameleon on plaid” and accused him of dealing “from the bottom of the deck”. In his campaign and subsequently, Hoover insinuated that FDR’s socialistic tendencies would put the country on a “march to Moscow”. Continue reading… More

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      in US Politics

      Big tech and corporate tax cuts: the targets of Joe Biden's urgent economic plans

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      When Joe Biden enters the White House on 20 January, he will face arguably the biggest set of challenges a president has had to tackle since the end of the second world war. The coronavirus is raging through the US, millions of Americans are still losing their jobs each month, and the climate crisis – ignored by the Trump administration – is deepening.
      Biden has set out his economic and policy plans, but without control of the Senate he may struggle to realise them. Official GDP figures for the third quarter showed the size of the economy was still almost 4% below its previous peak, despite a 7.4% recovery from the spring lockdown.
      At present it looks certain that the Democrats will control the House of Representatives, but we will have to wait for the results of special elections in Georgia before we know who controls the Senate. A Republican majority would block many of his proposals.
      Like Donald Trump, Biden can use executive orders – basically presidential decrees – to circumnavigate political roadblocks. While those orders would have major consequences, Biden is likely to struggle to pass significant legislation without Democratic control of both branches of Congress.
      But here are the some of the key elements of Bidenomics.
      Stimulus package More

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      in World Politics

      Why Populists at the Helm Are Bad for the Economy

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      Recep Tayyip Erdogan is a man on a mission. The goal: to make Turkey great again. Making Turkey great again, I guess, means wiping history clean of a series of humiliations, from the ignominious decline of the Ottoman Empire, dismissed as the “sick man upon the Bosporus” in the late 1800s, to the no less ignominious Treaty of Sèvres of 1920 that forced Istanbul to cede vast parts of its territory to France, the UK, Italy and Greece. The treaty not only marked the beginning of the empire’s demise, but also the origins of Turkish nationalism, which led to the establishment of the modern Turkish republic.

      President Erdogan is but the most recent and arguably most egregious expression of Turkish nationalism that seeks to restore past glory by gathering all Turkish peoples under one roof, similar to what once was known as pan-Slavism. This explains why Erdogan has been adamant in his support for Azerbaijan in its conflict with Armenia over Nagorno-Karabakh. Ironically enough, Erdogan has been amazingly sanguine with respect to the oppression of Muslim Uighurs in China’s Xinjiang province. As so often, money trumps convictions while hypocrisy runs rampant.

      In an Era of Strongman Politics, Turkey Is Hard to Call

      READ MORE

      This is deplorable, but, as US President Donald Trump has put is so eloquently, albeit in a different context, “It is what it is.” In any case, the topic here isn’t Erdogan’s attempt to establish himself as the champion of pan-Turkish nationalism or his attempt to affirm his claim to champion the cause of Islam, exemplified in his recent attacks against French President Emmanuel Macron. Instead, the focus is on Erdogan as a typical exponent of contemporary authoritarian populism.

      Claim to Legitimacy

      Populists base their claim to legitimacy on the notion that they promote the interests of “ordinary citizens” against an aloof elite far removed from everyday life, an elite that could care less about people’s concerns and worries. Against that, populists maintain that if elected, they will make the concerns and wellbeing of ordinary citizens their main priority. This is how Erdogan, Trump, India’s Narendra Modi and Brazil’s Jair Bolsonaro swept into office. This is what has been their claim to legitimacy.

      Unfortunately, hard reality is a far cry from lofty promises. Decades of experience with populist regimes shows that populists in power have a disastrous economic track record. To make things worse, populists appear to be particularly resistant to taking advice from those who have studied populist economics or learning from the glaring mistakes made by populist regimes in the past.

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      There is, by now, a substantial record of serious analysis of populist economics, largely based on the experience of Latin American populism. Take, for instance, Jeffrey Sachs, who certainly is above any suspicion of harboring right-wing proclivities. In a paper from 1989, he analyzed what he called the “populist policy cycle”: Overly “expansionary macroeconomic policies,” he observed, “lead to high inflation and severe balance of payments crises.”

      In a similar vein, Rüdiger Dornbusch and Sebastian Edwards noted in 1991, “Again and again, and in country after country, policymakers have embraced economic programs that rely heavily on the use of expansive fiscal and credit policies and overvalued currency to accelerate growth and redistribute income.” After a short-lived economic boom, problems emerge, engendering “unsustainable macroeconomic pressures that, at the end, result in the plummeting of real wages and severe balance of payment difficulties. The final outcome of these experiments has generally been galloping inflation, crisis, and the collapse of the economic system.” Ultimately, those supposed to benefit most from populist economic policies, i.e., the poor, end up worse off than they had been before the populists came to power.

      Recent developments in Turkey suggest that Erdogan’s regime might be heading in the same direction. Take, for instance, the evolution of the country’s currency, the lira. Over the past nine months, the lira has lost almost 25% of its value compared the US dollar and the euro. This reflects investor worries about rising inflation, depleting currency reserves and the fact that Turks appear to be fleeing into foreign currencies.

      Same Direction

      The concerns are hardly unfounded. In late September, the Turkish central bank raised interest rates by 200 basis points, from 8.25% to 10.25%, in an attempt to counter rising inflation. This marked a drastic reversal of previous policy. Starting in December 2019, it had successively slashed the interest rate, which at the time stood at 14%. The move was not entirely of the bank’s own making. In July, Erdogan, unhappy about the bank’s slow pace in cutting interest rates, dismissed its chief for not having “follow[ed] instruction.” His replacement dutifully embarked on a course of monetary easing, based on official projections that the inflation rate would fall to around 8% by the end of 2020.

      Monetary easing provoked a massive “credit binge” by both businesses and households, which, in turn, stoked the flames of inflation, far surpassing the projected 8% mark. In reality, inflation rose to around 12% in 2020. In response to monetary easing, private debt increased substantially, with often disastrous consequences. A prominent case in point is Turkey’s professional football clubs. The four most prominent ones — Besiktas, Galatasaray, Fenerbahce and Trabzonspor — have accumulated around €1.5 billion ($1.8 billion) worth of debt.

      The reason? In line with Erdogan’s goal to turn Turkey into a major global power, the country’s top football clubs endeavored to move into the Gotha of European football, on par with the likes of Real Madrid, Bayern München and Manchester City. In order to reach this goal, they borrowed heavily in euros and dollars in order to be able to attract international star players. The partial collapse of the Turkish lira, together with the drying up of revenues in the wake of COVID-19, has pushed all four clubs to the abyss of financial ruin.

      It would be going too far to suggest that this might be a preview of things to come for Turkey as a whole. In fact, the regime’s economic track record has been relatively successful in performing a balancing act between sane economic policy and populist inclinations. This has been due, to a significant extent, to the central bank’s relative independence, even if this has noticeably eroded over the past several years, constantly under pressure from the president to support the regime’s economic program. The recent rate hike might suggest, or so one might hope, that realism has once again gained the upper hand.

      This would certainly be a departure from business as usual as far as populist regimes are concerned. A recent extensive study by economists from the Kiel Institute for the World Economy and the University of Bonn in Germany provides an extensive and detailed account of the profound incompetence populist regimes have demonstrated when it comes to the basics of economics. Silvio Berlusconi’s tenure, for instance, did little to advance the life chances of ordinary Italians.

      Embed from Getty Images

      On the contrary, the upsurge in voter discontent and disenchantment that, for a short period of time, propelled the Five Star Movement to the top of Italian politics, reflects the opportunities wasted during Berlusconi’s reign. This has been particularly pronounced in Latin America, but not only there. In the medium and long run, as the study’s authors conclude, “virtually all countries governed by populists witness subpar economic outcomes evidenced by a substantial decline in real GDP and consumption.” It would be easy to dismiss these outcomes as the result of misguided policies, informed by good intentions but with disastrous consequences. My guess is, however, that this is only part of the story, and the less important one at that. Not for nothing those who have studied populism have emphasized the importance of the “common sense of common people” as a central trope in populist rhetoric, targeting expert “elites.”

      Unfortunately, more often than not, the common sense of the common people is completely wrong. Even more unfortunately, ignoring expert advice more often than not has disastrous consequences — in economics, as well as with regard to the coronavirus pandemic.

      Once again, Erdogan is a prominent example. Despite an upsurge in COVID-19 infections, the president has been more than reluctant to follow advice to impose stringent measures to contain the virus. At the same time, his political allies have accused Turkish medical experts of “treason,” reminiscent of similar slanders in the United States. To make matters worse, Erdogan’s shameful attack on President Macron in the wake of Islamicist-inspired terrorist attacks in France is hardly conducive to improving Turkey’s economic relations with Western Europe, a vital market for Turkish exports. So much for common sense.

      *[Fair Observer is a media partner of the Centre for Analysis of the Radical Right.]

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      in US Politics

      Trump has gone a long way toward hindering democracy in other countries

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      The president has questioned American democracy for four years, creating challenges abroadThe last time a Republican won the popular vote for president, the winning candidate declared that the spread of democracy was central to American security.“It is the policy of the United States to seek and support the growth of democratic movements and institutions in every nation and culture, with the ultimate goal of ending tyranny in our world,” said George W Bush in his second inaugural address in 2005. Continue reading… More

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      in Elections

      US economy bounces back but deeper trends hint at enduring woe

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      [embedded content]
      The US economy bounced sharply back from the record-setting slump at the start of the coronavirus pandemic, according to government figures released on Thursday, handing Donald Trump a key talking point days before the election.
      According to the Bureau of Economic Analysis gross domestic product (GDP) rose at an annualized rate of 33.1% between July and September and was up 7.4% compared to the previous quarter. The previous record was a 3.9% quarterly increase in 1950.
      Trump was quick to claim credit, tweeting the figures were the “Biggest and Best in the History of our Country, and not even close.”

      Donald J. Trump
      (@realDonaldTrump)
      GDP number just announced. Biggest and Best in the History of our Country, and not even close. Next year will be FANTASTIC!!! However, Sleepy Joe Biden and his proposed record setting tax increase, would kill it all. So glad this great GDP number came out before November 3rd.

      October 29, 2020

      But the numbers show the US still has a long way to go to escape the devastation wrought by Covid-19 and were boosted by extra unemployment payments, business loans and direct payments, none of which have been replenished for the fourth quarter.
      The news comes just five days before the US election and is the last major economic release before polls close. Even before the figures were released the Trump campaign released ads boasting: “FASTEST GDP GROWTH IN HISTORY.”
      Big issues remain for the economy, however. The growth rate announcement came on the same day that the labor department announced that another 751,000 people filed for unemployment claims last week and the unemployment rate, at 7.9%, is twice as high as it was in February before the pandemic struck the US.
      A closer look at the numbers shows that the US’s economic woes are far from over. Thursday’s figures follow an equally historic slump in the second quarter. The US economy shrank by a revised annual rate of 31.4% between April and June, its sharpest contraction since the second world war, as much of the country went into lockdown to control the virus.
      The annual rate suggests the economy will continue on its current trend for the rest of the year. But such huge swings make the annualized figures misleading – no one expects such massive losses or gains to continue but most economists expect the US economy to be smaller at the end of the year than it was at the beginning.
      Gus Faucher, chief economist at PNC, said the figures represented “real growth” but added “there is still a long way to go before we get back to normal.”
      The decision to reopen much of the economy has provided a considerable boost, especially to consumer spending, which drove much of the recovery. But it comes as coronavirus infections are soaring in the US. Covid cases hit new highs over the weekend and the US now has the largest number of infections, more than 8.6m, and deaths, over 225,000, in the world.
      There are also signs that the recovery has slowed in recent months. Unemployment claims remain at historically high levels and the number of new jobs being created has dropped month on month. The economic situation for women, people of colour and teenagers remains difficult. The unemployment rate fell to 7.9% for the US population overall in September. For Black Americans it was 12.1% and for Black teens (16-19) it was over 20%.
      GDP is the broadest measure of the economy and includes personal consumption, business investment, government spending and net exports. The figure has often been criticized as a measure of economic health – GDP growth has, for example, done little to address growing income inequality.
      For some still feeling the impact of the pandemic and its attendant recession the latest GDP news was little comfort, especially as Congress remains deadlocked over further stimulus relief.
      Tim Swartz in Mesa, Arizona, stopped receiving unemployment benefits on 5 September after the unemployment office flagged an issue with his payments. When the pandemic hit he had to stop working as an Uber and delivery driver to care for his five children, including one with special needs. His wife works full-time as a medicine technician at a facility for Alzheimer’s patients.
      “I cannot get any answers from anyone on the phone or through emails. I’m behind on rent and utilities,” Swartz said. He has now received an eviction notice. “I’m not sure how we will pay the outstanding balances for rent and utilities,” he said.
      “Many of us are losing hope along with everything we have worked so hard for,” said Swartz. Three of his children had to recently return to online learning after exposure to classmates who tested positive for coronavirus, further delaying his return to work. “Without any relief package to help keep the economy going I don’t see much growth in the near future and unfortunately even darker times ahead for American families.” More

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      in US Politics

      Investors should prepare for worst over US presidential election

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      Opinion polls in the US have long pointed to the strong possibility of a Democratic party sweep in the election on 3 November, with Joe Biden winning the presidency and Democrats gaining control of the US Senate and holding on to the House of Representatives, putting an end to divided government.
      But if the election turns out to be mostly a referendum on Donald Trump, Democrats might win just the White House while failing to retake the Senate. And one cannot rule out the possibility of Donald Trump navigating a narrow path to an electoral college victory, and of Republicans holding on to the Senate, thus reproducing the status quo.
      More ominous is the prospect of a long-contested result, with both sides refusing to concede as they wage ugly legal and political battles in the courts, through the media, and on the streets. In the contested 2000 election, it took until 12 December for the matter to be decided: the supreme court ruled in favour of George W Bush, and his Democratic opponent, Al Gore, gracefully conceded. Rattled by the political uncertainty, the stock market during this period fell by more than 7%. This time, the uncertainty could last for much longer – perhaps even months – implying serious risks for the markets.
      This nightmare scenario must be taken seriously, even if it currently seems unlikely. While Biden has consistently led in the polls, so, too, had Hillary Clinton on the eve of the 2016 election. It remains to be seen if there will be a slight surge in “shy” swing-state Trump voters who are unwilling to reveal their true preferences to pollsters.
      Moreover, as in 2016, massive disinformation campaigns (foreign and domestic) are under way. US authorities have warned that Russia, China, Iran and other hostile foreign powers are actively trying to influence the election and cast doubt on the legitimacy of the balloting process. Trolls and bots are flooding social media with conspiracy theories, fake news, deep fakes and misinformation. Trump and some of his fellow Republicans have embraced lunatic conspiracy theories such as QAnon and signalled their tacit support of white supremacist groups. In many Republican-controlled states, governors and other public officials are openly deploying dirty tricks to suppress the votes of Democratic-leaning cohorts.
      On top of all this, Trump has repeatedly claimed – falsely – that mail-in ballots cannot be trusted, because he anticipates that Democrats will comprise a disproportionate share of those not voting in person (as a pandemic-era precaution). He also has refused to say that he will relinquish power if he loses and has instead given a wink and a nod to right-wing militias (“stand back and stand by”) that have already been sowing chaos in the streets and plotting acts of domestic terrorism. If Trump loses and resorts to claiming that the election was rigged, violence and civil strife could be highly likely.
      Indeed, if the initial reported results on election night do not immediately indicate a sweep for the Democrats, Trump would almost certainly declare victory in battleground states before all mail-in ballots have been counted. Republican operatives already have plans to suspend the counting in key states by challenging such ballots’ validity. They will be waging these legal battles in Republican-controlled state capitals, local and federal courts stacked with Trump-appointed judges, a supreme court with a 6-3 conservative majority and a House of Representatives where, in the event of an electoral college draw, Republicans hold the majority of state delegations.
      At the same time, all of the white armed militias currently “standing by” could take to the streets to foment violence and chaos. The goal would be to provoke leftist counterviolence, giving Trump a pretext to invoke the Insurrection Act and deploy federal law enforcement or the US military to restore “law and order” (as he has previously threatened to do). With this endgame apparently in mind, the Trump administration has already designated several major Democratic-led cities as “anarchist hubs” that may need to be put down. In other words, Trump and his cronies have made clear that they will use any means necessary to steal the election; and, given the wide range of tools at the executive branch’s disposal, they could succeed if early election results are close, rather than showing a clear Biden sweep.
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      To be sure, if early results on election night show Biden with a strong lead even in traditionally Republican states such as North Carolina, Florida or Texas, Trump would find it much harder to contest the result for more than a few days, and he would concede sooner. The problem is that anything short of a clear Biden landslide will leave an opening for Trump (and the foreign governments supporting him) to muddy the waters with chaos and disinformation as they manoeuvre to shift the final decision to more sympathetic venues such as the courts.
      This degree of political instability could trigger a major risk-off episode in financial markets at a time when the economy is already slowing and the near-term prospects for additional policy stimulus remain grim. If an election dispute drags on – perhaps into early next year – stock prices could fall by as much as 10%, government bond yields would decline (though they are already quite low), and the global flight to safety would push gold prices higher. Usually in this type of scenario the US dollar would strengthen; but, because this particular episode would have been triggered by US-based political chaos, capital might actually flee from the dollar, leaving it weaker.
      One thing is certain: a highly contested election would cause further damage to the US’s global image as an exemplar of democracy and the rule of law, eroding its soft power. Particularly over the past four years, the country has increasingly come to be regarded as a political mess. While hoping that the chaotic outcomes outlined above do not come to pass – polls still show a strong lead for Biden – investors should be preparing for the worst, not only on election day but in the weeks and months thereafter.
      • Nouriel Roubini is professor of economics at New York University’s Stern School of Business. He has worked for the International Monetary Fund, the US Federal Reserve and the World Bank.
      © Project Syndicate More