Political chaos could come to undermine America’s economic strengthby George Magnus / October 23, 2017 / Leave a comment
I referred somewhat flippantly in a recent column here to America becoming an emerging market. You might say correctly that the world’s largest economy is in a different league. I meant it differently, though, and not, of course, as a compliment. For along with things that investment managers assure us of, including high economic growth and better prospective investment returns, emerging markets also present higher risks. These normally boil down to some combination of a dysfunctional political system and weak standards of economic governance.
So, while the US is at the moment economically head and shoulders above the likes of Brazil, Turkey, Russia, and in most respects China, the question is whether it is converging with them politically. And if so, will that eventually threaten to compromise America’s economic heft? Is the US, in effect, compromising political and institutional progress made over many years?
President Trump and his entourage of billionaires and generals are having a palpable adverse impact on Washington politics, threatening US institutions including the media and the legal system, and railing against neighbouring countries and commercial allies. The governance problems that have erupted since the beginning of the year may have been predicted in general terms, but they have nonetheless come as a shock to America’s system, and to the rest of the world. The behaviour of the US administration is not so different from what we often expect in some emerging markets.