‘Incoherent’. ‘Inconsistent’. ‘Unreal’. ‘Disconnect from Reality’. These are some of the words (and phrases) being bandied about Donald Trump and his brand of politics since the 47th President of the US assumed office. The implication is that the Trump presidency is suffused with so much uncertainty that not only roil markets but politics in the US and the world.
A corollary here is that Donald Trump’s ‘erratic nature’ and the politics that flow from this spells gloom and doom. But while critics may have a point but what they elide over or do not see is that all this - inconsistency, incoherence and so on, used more as epithets - may precisely be the point of the Trump administration.
In the aggregate, all this suggests itself to the ‘return of political economy’ as the arbiter of politics within and without and even international relations rather than the other way round. To get a grip on this assertion, I shall examine the work of the Hungarian Economist, Karl Polyani, ‘The Great Transformation’ and the ‘Efficient Market Hypothesis’ postulated by Eugene Fama (in rough and reductive terms).
But first, a word on political economy. What does it mean?
Broadly, political economy refers to how politics and economics relate to each other. Or, in market forces, supply and demand, trade, economic growth and redistribution relate to the politics, institutions and laws of a given country. (Obiter dictum, these are all elements that Donald Trump is rejigging).
Since the early eighties (if a date can be attributed to the trend), political economy was subsumed under markets and their reach. This came to be known as globalization which morphed into globalism.
Allied to both was the international system and structure which gyrated to periods of stability and instability. But, in the main, a kind of a consensus was reached where globalization was seen as ‘good’ and the route to power and prestige for nations - again allied to the international system and structure.
The globalization fetish became the ‘new game in town’ resulting in a scramble. One consequence of this was great inequality around the world and even in the progenitor of globalization, the United States. In the schema, markets were the ultimate arbiter of politics, wealth, growth and distribution, power and culture.
It would appear that one of the underlying premises of ‘market fundamentalism’ was Eugene Fama’s, ‘Efficient Market Hypothesis’ (EMH) which postulated that, asset prices reflected all available information and that it was impossible to beat the market consistently given that market prices react only to new information.
What emerged partly by design (by market fundamentalists) and partly by default was the ‘dis-embedding of the economy from society, the creation of a market society and commodification’ - delineated brilliantly by Karl Polyani.
From this, Polyani averred, the ‘double movement’ - that is, ‘the dialectical process of marketization and the push for social protection against this marketization’. Economy is then sought to be re-embedded through labor laws and tariffs.
Polyani’s delineation of ‘The Great Transformation’ and the ‘double movement’ seems like an eerie echo of the politics and policies of Donald Trump and his administration - so much so that the 47th President of the United States seems to emblematize it.
Be it reshoring of production, throwing a spanner into global and regional supply chains, ‘reciprocal tariffs’, weaponization of tariffs, the tug of war between these and interest rates putting the US Federal Reserve on the backfoot and thereby creating an adjustment issue for all Central Banks of the world, all these carry the hallmarks of ‘The Great Transformation’.
Or in other words, political economy which is back with a vengeance leaving its imprimatur on the international system and structure. In this broad schema, Donald Trump is ‘trip wiring’ the markets by, one, actually using elements of the ‘Efficient Market Hypothesis’ (EMH) by making markets reflect new information (policy and political uncertainty) and also subverting it by beating the market.
(In the process the ‘market clearing’ and ‘market adjustment’ processes are thrown into a tizzy). This is inevitably having an impact on how nations of the world interact with each other and the United States. This means that political economy – under the Trump administration - is becoming the driving force of international relations and world politics.
Whether Donald Trump succeeds in ‘re-embedding the economy in society’ or not – in a neat or a rough way - may be beside the point. What is pertinent to note is that ‘The Great Transformation’ is happening and in its sinews deliberately induced uncertainty is its cardinal feature.
On an unrelated but related note, while it was Joseph Biden who toward the fag end of his presidency called attention to an ‘inflection point’ in world politics, it is under Donald Trump that everything that matters is at an inflection point.
In this sense then, ‘inconsistency’, ‘incoherence’, ‘unreality’ are all not the personality traits of the 47th President of the United States but appear to be more in the nature of inducing uncertainty to arrive at certain ends. This, in turn, then becomes an extremely delicate point in United States political history, and its politics and thereby the world’s.
Given this paradigm changing, and its immense implications on the United States and the world, what follows becomes very important.
How Donald Trump will comport himself and his politics, say in two to three months’ time will be momentous. Will it be inducing more uncertainty? Or will it be giving shape to the detritus of this uncertainty? Time will tell!
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