Global News January 18, 2017

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  2. Global News January 18, 2017

Zero Hedge

“The Economic Policy Trump Should Pursue”

Recent electoral outcomes, including Trump’s election, highlight the intensifying economic grievances of many households across the developed world. In the 20 years before the 2008 financial crisis, unprecedented globalization raised incomes for just about everyone. The incomes of the poorest third of humanity rose by 40-70%, and those of the middle third increased by 80%. The top 1% did even better – so much better, in fact, that the business elite is now facing a powerful backlash.

On the environmental front, the evidence is dire. Human activity has already pushed the planet beyond four of its nine physical safety boundaries, including those for climate change and loss of biosphere integrity. The rapidly rising costs of environmental damage are restricting economic growth, making the relaxation of environmental protections a false economy.

For example, damage to ecosystems and biodiversity caused by current practices in the food and agriculture sector alone could cost the equivalent of 18% of global economic output by 2050, up from around 3% in 2008. In emerging markets, especially in Asia, rapid economic expansion has brought life-threatening smog and constant gridlock to cities unable to expand their infrastructure fast enough.

Tackling the world’s environmental and ecological problems, and improving the lot of those who have been left behind, will require public action, such as that which I oversaw in my roles at the World Bank, the United Nations, and the British government. But it will also demand the participation of business.

As for the US, this strategy aligns with Trump’s own declared priorities. Not only does it offer the most promising solution to the economic grievances of his core supporters; it also entails a surge in infrastructure spending, much like the one Trump has already promised.

Instead of using fiscal stimulus in a vain effort to revive failed smokestack industries and old energy sources, Trump’s administration – and the world – should place its bets on a low-carbon future. Plenty of businesses surely would get on board.



“In the Weapons Trade, Trump’s NATO Jibes Are Good for Business”

Trump himself is the change-maker. He reaffirmed his skepticism about the North Atlantic Treaty Organization, and his readiness to make deals with Russia, in European media interviews published last weekend. Trump isn’t famous for his policy consistency, but those positions have held fairly steady — leaving European leaders wondering whether they can still rely on the American security umbrella.

“Let’s not fool ourselves,” German Chancellor Angela Merkel said last week. “There is no infinite guarantee.”

So Merkel’s Germany, and many other European nations, are boosting military budgets. The plans predate Trump, and under NATO rules they should’ve been carried out long ago. The alliance expects its members to spend 2 percent of gross domestic product on defense. But it’s no secret that most of them don’t. The shortfall added up to about $121 billion last year at 2010 prices, according to Bloomberg calculations based on NATO country estimates.

NATO was established after World War II to protect western democracies against the Soviet Union. A key tenet is that an attack on any alliance member is considered an attack on all. And that’s what Trump has questioned.

If Russia moved against one of NATO’s Baltic members, Trump told the New York Times in July, he’d come to their aid only after reviewing whether they have “fulfilled their obligations to us.”

To be sure, even in Europe’s “new strategic reality” in which NATO guarantees are no longer unconditional, some defense budgets will likely fall short, said Jan Techau, head of the Richard C. Holbrooke Forum at the American Academy in Berlin. “The Europeans will have to do something,” he said. “But I have my doubts that we’ll get across-the-board 2 percent spending.”

‘Bullish Trade’

Raytheon and BAE were among the defense stocks that surged the day after Trump’s election, as analysts rushed to recommend them. Barclays upgraded Lockheed Martin Corp., Northrop Grumman Corp. and L3 Technologies Inc. as analyst Carter Copeland said Trump’s win “gives new life to a bullish trade.” The main S&P defense index has added 11 percent since then, almost double the gain on the broader S&P 500.

Of course, Trump’s international policy remains embryonic. His nominees for key posts have sounded less conciliatory toward Russia: Prospective Defense Secretary James Mattis branded it a “strategic competitor” at a Senate confirmation hearing last week, and stressed the importance of NATO. Mattis did echo Trump, though, by saying he’d encourage alliance members to spend more on defense.