Military historians sometimes refer to the hinge of a battle or a campaign. That is a point at which some specific incident leads to a decisive swing in one direction or the other. Unfortunately, predicting the occurrence and outcome of a hinge is difficult.
2019 could have multiple economic hinges that swing the global economy one way or another. Indians will be focussed on the General Elections, which will take place sometime in April or May. A new government taking charge of the world’s sixth-biggest economy (or third-largest economy in purchasing power parity terms) could significantly alter the prospects for global growth.
There is also Brexit – a slow moving train wreck that has been a work-in-progress since late 2016. The United Kingdom is a large economy and a major financial centre. What sort of ties it maintains with the world’s largest trading bloc, the European Union, will definitely affect global growth.
There are also sundry hinges created, if that is the right word, by the unpredictable actions of United States President Donald Trump. This includes the trade war with China, US sanctions against Iran, and recent demands that the US Congress fund an absurd artefact – a wall on its border with Mexico. The outcomes of these will also definitely affect economic growth.
The US president is now the subject of 17 different ongoing investigations. These include examinations of his personal finances, allegations of campaign violations, allegations of multiple tax frauds – a veritable smorgasbord of unpleasant crimes. The legal ramifications of this are hard to work out. This is unprecedented. No US president has faced such a wide-ranging set of charges, including some which carry jail sentences. Whether Congress will allow him to be impeached, whether sufficient evidence can be brought for him to face jail – these are all imponderables.
Some of those investigations have already resulted in guilty pleas and jail sentences for close associates of Trump. At some stage – and that stage may not be too far away – Trump himself will surely face charges in some investigation or another.
Then, if we go by Trump’s operating style, he will attempt to create multiple distractions to avoid being impeached, or even worse, brought to trial. By virtue of his position, the US president has the power to create distractions of an order few other individuals can.
The Donald Trump factor
Trump has an unusual psychological profile. He is utterly shameless and I mean that purely as a statement of fact. Most politicians are hardened liars but most politicians are also a little embarrassed if they are caught out telling lies.
Trump has no problem about lying publicly and continuously, even when he knows he will be caught out instantly. He has averaged over 10 verifiable lies per day during his presidency. The rate of lying has increased in 2018, when he averaged over 15 lies per day. This may be coincidence or it could be that he has grown more brazen as the investigations have edged closer to home with guilty pleas from former associates.
He is also an unusually callous man, unaffected by poor public relations, and apparently unconcerned about causing harm to anybody else. Children have died in US government custody after being separated from their parents as a direct result of his actions. No problem. Lunatics have attacked newspaper offices. No problem. Neo-Nazis have held racist rallies. No problem.
Trump really does not care. He has publicly insulted American war heroes from his own political party, he has abused leaders of other nuclear armed nations, criticised his own Federal Reserve appointee, and mocked physically-disabled people. There are credible reports that he considered using nuclear weapons just because he could, and he has certainly threatened publicly to do so. So, one cannot rule out extreme actions by him as some form of distraction if he believes he is facing a jail sentence.
His actions in the last two years have generally been poorly thought out and had poor outcomes. He has pulled America out of climate change mitigation programmes and cut back environmental protections. But those at least were consistent with his campaign platforms.
The trade war with China has, arguably, harmed the US as much as it has hurt China. It has led to an economic slowdown in China, and also in higher costs for a wide range of goods for Americans. The US buys stuff from China because it is better value for money. Imposing tariffs on Chinese imports means that Americans pay more, or they buy inferior goods, or both. At the same time, retaliatory tariffs by China have created barriers for US exporters. Similarly, tighter visa laws have led to higher information technology costs for American businesses, even as they have shackled information technology service providers.
How does this help the US even as it contributes to a global slowdown?
Known unknowns
The US sanctions against Iran also appear to have caused all-round uncertainty in energy markets, without necessarily affecting Iran’s ability to build nuclear weapons or support Shia militias in West Asia. These sanctions have also provoked India and China into setting up alternative payment systems that do not involve dollar transfers to Iran.
Last month’s announcement by Trump that he was withdrawing troops from Syria led to the resignation of Defense Secretary Jim Mattis. This move will leave Russia to boss over the region, with Turkey getting a free hand to fight the Peshmerga in north Iraq as well. It will also leave the Islamic State with some forces intact. Back in the US, the famous border wall looks unlikely to be built, given the reluctance on the part of Congress to fund it, and it will not necessarily stop immigration from Latin America anyway.
So what would Trump do if he senses the looming shadow of handcuffs? It is hard to guess. A US president has enormous constitutional powers, including the power to launch nuclear strikes, or to order sanctions, or abrogate treaties. This particular president’s actions are unrestrained by normal human impulses, such as shame, compassion, or the fear of looking stupid. While he can be relied upon to act in what he considers his self-interest, his track record suggests his actions usually do not have the outcomes that he would consider optimal.
Brexit and Lok Sabha elections and their outcomes are known unknowns – investors and economists can build scenarios around various possible outcomes. But Trump’s constitutional position, coupled with his unusual personality and the very real possibility of his being criminally indicted, could give rise to black swan events, which are extremely difficult to predict.
Therefore, amidst all the big uncertainties that bedevil the world as we enter 2019, the most bigly of all may be the actions Trump could take if he sees himself in genuine danger of being sent to jail.