Goodbye 'decoupling,' hello 'coupling'
The U.S. presidential elections, which will be finalized two days after you read this article, have once again shown that, from now on, all the political and economic developments in the leading developed and developing economies of the world; namely, in the G20 countries, are relevant to the entire world and directly affect the global scheme of things. We heard about this seven years ago from the International Monetary Fund (IMF) and World Bank reports on the consequences of the global financial crisis that mentioned the "decoupling" of Asian economies. According to this phenomenon, Asian economies have successfully decoupled themselves from the financial crisis that broke out in the West by leveraging their internal trade volumes. Today, however, decoupling is possible for neither the East nor the West. Thus, today marks the end of decoupling.
Even though the problems brewing on both sides of the Atlantic have begun to have a weakening effect on leading world economies now nearing the end of the sixth year of financial mayhem, one thing is certain: global trade is directly affected by China's economic transformation process, the unimproving growth-and-consumption ratios in EU countries and rising global commodity prices which, in turn, have a harmful effect on exporting countries. Thus, if the world wishes to re-seize its sustainable growth, the overwhelming effects of production and trade demand on the global economy need to be addressed.
While the growth rate in global trade has hovered around 5 percent in the last 25 years, from 2012 to 2016 that rate shifted to 2.5 percent, indicating a red flag for analysts, who expect the growth rate for 2016 to be 1.7 percent. While the effects of China's economic slowdown were mainly concentrated in Pacific countries, Europe was also dealt its own economic blow and the euro is still recovering at a slow pace, which hurts the entire global economy. Thus, it is necessary to seek ways to increase consumer confidence in the economy, boost investments in the private sector and focus these efforts first on the economies of developed countries like the U.S. and the Schengen Zone. We have already seen evidence of this in countries where megaprojects are reviving the global trade market. As the coupling among the G20 nations is intensified to this extent, it is paramount to solve the affliction to come up with mutual solutions, as soon as possible. Touching on the global economic issues, President Recep Tayyip Erdoğan said on Friday in an event in Istanbul that the countries that induced the crisis have not put in enough effort to resolve the crisis.
Neo-liberalism versus Neo-Keynesian
These lines were drafted just a few days before the U.S. presidential elections. The atmosphere of this election will be remembered in the history of U.S. elections not for the effectiveness of the candidates or the promises made by them but, instead, for their scandals. Both candidates have hit each other below-the-belt and, on top of that, the FBI's investigation into Clinton's e-mails just one week before the elections has caused arguments from each side to heat up. Despite all this, it can be said that Hillary Clinton's economic pledges are more neo-Keynesian whereas Donald Trump's' are more neo-liberal.
As a democratic candidate, Clinton proposed to increase the now $7.5 per hour minimum wage to $12; nevertheless, as Trump, who does not want to give out a bad message with an increase in labor costs in terms of neo-liberal politics, has first said he would leave this issue to state governors, and then, two weeks later, stated he can also increase the minimum wage to $10. Interestingly, Clinton is warming up to the idea of implementing free trade deals with various countries while Trump is strictly against it. On the other hand, Clinton has serious reservations with the Trans-Pacific Partnership (TPP) while Trump, on top of opposing both the TPP and the Transatlantic Trade and Investment Partnership (TTIP), wants a 45-percent tariff on the goods imported from China and a 35 percent on those from Mexico.
Another interesting point to mention is that, Clinton refrains from increasing taxes on the rich, demanding only a small increase on taxes for the highest tax bracket. Trump, however, as a neo-liberal, promises a more serious tax to the rich and a limited tax reduction for the lower income class according to a pro-supply approach. It looks like none of the candidates hold points-of-view or pursuits to increase public spending and to plan its financing regardless of the necessities of the U.S. infrastructure and the problems of renewal in electricity and other grids.
Clinton is well aware of the damage done by deregulations on the banking law and the mortgage crisis which came close to the end of her husband Bill Clinton's second term. That's why she wants to limit high frequency financial transactions following the last global financial crisis and supports the Dodd-Frank Act. Trump, naturally, wishes to remove the Dodd-Frank entirely and claims that excessive de-regulations will result in more than $2 trillion losses to the national economy. Personally speaking, neither of the two candidates have really grasped the problems of the global economy. I hope, after this election, they will spend enough time on this subject before they come into office.
Even though the problems brewing on both sides of the Atlantic have begun to have a weakening effect on leading world economies now nearing the end of the sixth year of financial mayhem, one thing is certain: global trade is directly affected by China's economic transformation process, the unimproving growth-and-consumption ratios in EU countries and rising global commodity prices which, in turn, have a harmful effect on exporting countries. Thus, if the world wishes to re-seize its sustainable growth, the overwhelming effects of production and trade demand on the global economy need to be addressed.
While the growth rate in global trade has hovered around 5 percent in the last 25 years, from 2012 to 2016 that rate shifted to 2.5 percent, indicating a red flag for analysts, who expect the growth rate for 2016 to be 1.7 percent. While the effects of China's economic slowdown were mainly concentrated in Pacific countries, Europe was also dealt its own economic blow and the euro is still recovering at a slow pace, which hurts the entire global economy. Thus, it is necessary to seek ways to increase consumer confidence in the economy, boost investments in the private sector and focus these efforts first on the economies of developed countries like the U.S. and the Schengen Zone. We have already seen evidence of this in countries where megaprojects are reviving the global trade market. As the coupling among the G20 nations is intensified to this extent, it is paramount to solve the affliction to come up with mutual solutions, as soon as possible. Touching on the global economic issues, President Recep Tayyip Erdoğan said on Friday in an event in Istanbul that the countries that induced the crisis have not put in enough effort to resolve the crisis.
Neo-liberalism versus Neo-Keynesian
These lines were drafted just a few days before the U.S. presidential elections. The atmosphere of this election will be remembered in the history of U.S. elections not for the effectiveness of the candidates or the promises made by them but, instead, for their scandals. Both candidates have hit each other below-the-belt and, on top of that, the FBI's investigation into Clinton's e-mails just one week before the elections has caused arguments from each side to heat up. Despite all this, it can be said that Hillary Clinton's economic pledges are more neo-Keynesian whereas Donald Trump's' are more neo-liberal.
As a democratic candidate, Clinton proposed to increase the now $7.5 per hour minimum wage to $12; nevertheless, as Trump, who does not want to give out a bad message with an increase in labor costs in terms of neo-liberal politics, has first said he would leave this issue to state governors, and then, two weeks later, stated he can also increase the minimum wage to $10. Interestingly, Clinton is warming up to the idea of implementing free trade deals with various countries while Trump is strictly against it. On the other hand, Clinton has serious reservations with the Trans-Pacific Partnership (TPP) while Trump, on top of opposing both the TPP and the Transatlantic Trade and Investment Partnership (TTIP), wants a 45-percent tariff on the goods imported from China and a 35 percent on those from Mexico.
Another interesting point to mention is that, Clinton refrains from increasing taxes on the rich, demanding only a small increase on taxes for the highest tax bracket. Trump, however, as a neo-liberal, promises a more serious tax to the rich and a limited tax reduction for the lower income class according to a pro-supply approach. It looks like none of the candidates hold points-of-view or pursuits to increase public spending and to plan its financing regardless of the necessities of the U.S. infrastructure and the problems of renewal in electricity and other grids.
Clinton is well aware of the damage done by deregulations on the banking law and the mortgage crisis which came close to the end of her husband Bill Clinton's second term. That's why she wants to limit high frequency financial transactions following the last global financial crisis and supports the Dodd-Frank Act. Trump, naturally, wishes to remove the Dodd-Frank entirely and claims that excessive de-regulations will result in more than $2 trillion losses to the national economy. Personally speaking, neither of the two candidates have really grasped the problems of the global economy. I hope, after this election, they will spend enough time on this subject before they come into office.