I followed Nate Silver’s website in the run-up to the US presidential election last November. His were the most accurate forecasts in 2008 and 2012, and I find his methodology of focusing on aggregating local polls rather than relying on national polls very sensible. After all, a common phrase in the US is “all politics is local”. Silver, the founder and editor-in-chief of ESPN’s FiveThirtyEight, then generates the probability of a candidate winning the presidential election based on the distribution of winning probabilities to each state.
On the eve of the election, he gave Hillary Clinton a less than 80% probability of winning. It was not a “slam dunk”, to use a basketball metaphor. In mathematical parlance, a more than 20% of anything is non-trivial. The odds of Donald Trump winning the election were about the same as the odds of a professional basketball player in the NBA missing a free throw. They miss free throws in every game!
In that regard, Trump’s victory was not totally unpredicted. Ex-post, his victory is even understandable — how everyone underestimated the angst of the white working class populating the industrial Midwest whose livelihood had stagnated and even deteriorated in the last few decades, and seeing how the demographic landscape had changed with immigration.
Globalisation rewards those who have the means to participate and punishes quite severely those in developed economies who have lost out to similarly endowed labour in less developed countries.
Globalisation created marginalised communities that were poorly served by successive US governments that were more interested in partisanship than addressing their problems. However, as an economy, the US has been a winner in the globalisation game — its companies have greatly benefited from the growth and expansion of global trade and the new firms in emerging technologies are largely American. It is easy to be deluded and overlook the plight of those who have been left behind. Fighting for the economically marginalised seems unfashionable.
There is, therefore, understandable fear, loss of hope and frustration with politics and government in this constituency. Apart from positioning himself as a Washington outsider, Trump’s campaign stoked fear and fed on their genuine insecurities.
Along the way, his bandwagon gathered many from the fringes — racists, bigots, misogynists and pseudo-intellectuals with their grand conspiracy and clash of civilisations theories. While the economically marginalised hoped for a better and more effective government, the latter provided the ideological underpinnings for the policies of the Trump administration.
The Economist recently described the Trump administration as made up of “greenhorns, oddballs and second raters”. That is almost the description of revolutionaries, victorious revolutionaries who are, almost by definition, inexperienced and somewhat confused about the details of what they want to achieve and how to go about it. Yet, everyone expects certainties in this changing of the guard. Not only will there be policy uncertainties and a lack of coherence but there are also going to be alarming instances of a lack of administrative competences.
A sufficient critical mass of discontent, not necessarily by the majority, is required to effect the kind of discontinuous change that the Trump election can possibly become. We see this potent mix of discontent, which is largely economic in nature, and ideology in inflection points in history, from the American Revolution in 1776 to the 1917 Bolshevik Revolution to what happened in Iran in 1979.
What is definite is that Trumpism seeks to revolutionise America and how it relates to the world. It is still early days but it is apparent that Trump means to implement what was said during his campaign. There is no realpolitik and the only obstacle to implementing his policies is the institutional strength of the American system — the checks and balances in the separation of powers between the presidency, Congress and the courts. Of course, some of these economic policies, if implemented, will result in negative outcomes and may affect their popularity.
While attempts to secure the border and even economic nationalism are understandable to a degree, there are facets of Trumpism that belie the American ideal of enlightenment, and whose insularity and discord are dangerous to the rest of the world. There is a certain lack of civility and a xenophobic and dismissive perspective of “the others”, who, by word and deed, include the Mexicans and Muslims. This is repugnant and not befitting the “land of liberty” that defined what the US stood for at the birth of the nation 240 years ago.
Malaysia should be prepared for a world where the US administration has dismantled the very institutional structures advocated by past American administrations since the end of the Second World War. It remains to be seen to what extent Trump will undo these in his effort to “put America first”, in “making America great again”, but his policy posture towards the UN, the IMF and the WTO, and observance of multilateral treaties, such as the Kyoto Protocol, as well as his domestic policies on banking regulations and customer protection will have far-reaching economic consequences.
An American administration bent on the idea of American exceptionalism in a world of fairly integrated economics is a risky one, even before considering what its foreign policy will look like. What will be the tax treatment for US firms operating and making profits overseas? Will the US impose import duties? How serious is Trump in his accusation that China manipulates its currency and what will he do about it? How will global trade be affected?
Malaysia should also pay heed to the two parts of a potent mixture that can create the discontinuous changes that we are witnessing in the US and Europe. The first part is discontent among the marginalised in the absolute and relative sense. Those in the lowest quintile of income distribution are economically marginalised in the absolute sense. In Malaysia, these are households making less than RM2,000 a month. While not categorised as poor — households have to earn less than RM1,000 a month to be considered poor — the concerns of these households are primarily about survival.
Then, there is the working middle-class — about half the households in Malaysia that are making between RM2,000 and RM6,000 a month. These represent the relatively marginalised group — a larger group of potentially disgruntled constituency who are more receptive to ideas about how to make things better.
Discontent is fertile ground to breed and receive radical and insular ideologies — the second part of the potentially combustible mix. In Malaysia, it has always been about using race-based explanations for why things are the way they are and what to do about them. This despite inequality now losing its racial character because inequality is more pronounced within each race. Race remains an important theme in discussing reasons and solutions, and elements of this have even been institutionalised.
In more recent years, religion has come to the fore. The Malaysian divide is no longer primarily racial because religion, particularly the advocacy of not Islamic values but an interpretation of Islamic laws and institutions, has gained traction in the political marketplace.
To be clear, it is not an open debate and contest of ideas about the religion but simply an attempt to leverage the majority race to impose a set of beliefs and even laws on the rest. None of this will address the marginalisation issues or present new ideas for national development but it has found fertile ground in the psyche of the masses.
Trumpism is, at least, about “making America great again” as an economic and political power. The phenomenon we are witnessing in Malaysia seems to be about a sense of personal salvation but one that is perpetuated and exploited by those in the political marketplace. There is, therefore, less or no emphasis on capabilities and competitiveness or even on the integrity of institutions and governance. If Trumpism is about blaming others for America’s problems, the phenomenon in Malaysia seems to be about redefining goals and even a bit of escapism. Striving for excellence and competitiveness is a much harder goal.
It is, therefore, important that the marketplace of ideas is an open and vibrant one. This marketplace must be highly competitive to price bad ideas properly. Bad ideas can easily find a constituency among the discontent and there is no shortage of peddlers of bad ideas — ideologues or simply self-serving opportunists.
As is evident in the Trump phenomenon, the political marketplace can produce what, in my view, is an inferior equilibrium. The opportunity costs of such an equilibrium for the economy and society as a whole are forbidding. We must avoid it.
Dr Nungsari Radhi is an economist and managing director of Prokhas Sdn Bhd, a Ministry of Finance advisory company. The views expressed here are his own.
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