Status quo and normalcy bias is on florid display in board rooms and cubicles alike across America. Since the election of Donald Trump and the halting, abnormal formation of what looks like it might be an administration, I hear some executives replacing strategic analysis with wishful thinking about what this new government means for business. Normalcy bias is causing these people to assume that because the “Republican” brand name is associated with Mr. Trump, that the policies – and outcomes – to follow are likely to be reminiscent of of Reagan or even George W. Bush. The assumption is that there will be lower taxes and less regulation, which is presumed broadly to be the cause of slow economic growth. These executives are projecting images about the past onto the future without regard to the very clear statements made by Trump and his proxies already about the Nationalist policies he intends to pursue.
This strategic blindness is enormously dangerous, because the stated policy goals are to upend every single guiding principle that made the United States the economic, cultural, and political leader of the free world. This position also made America the architect of the largest economic expansion in history. Abandoning this position will thereby blow up the current global balance of power, and there is no predicting the outcome of the order – or disorder – that might take its place. Business executives – and everyone else – must therefore be on guard and clear-eyed about what comes next.
Tenets of American global leadership and how they will be abandoned
The 20th century was led by America after World War II, largely due to its economic vitality in the aftermath of the inferno and the policies it engaged to forge the nation’s free, democratic countries into an alliance. This position was solidified by four major national policies:
- Establishment of a baseline national welfare system to address extreme poverty and healthcare for the poor and elderly as a right of citizenship
- Expansion of civil rights for a broad swath of the population
- Promotion of liberal democracy abroad
- Unification of European countries into NATO as a bulwark against Soviet aggression
The fruits of these policies cannot be overestimated in the emergence of the United States as the world’s superpower. In the face of ideological foes from the Soviet Union, the U.S. simultaneously contained the Soviet advance and secured European and Asian nations as peaceful trading partners, leading to the current world order where war has plummeted as a cause of death in a manner unprecedented in history. While Medicare and civil rights for Americans may seem more domestic than global in their implications, remember that America was selling the integrity and moral superiority of its governmental and economic systems around the world. The U.S. was competing ideologically with Soviet communists, and the sale would not have worked without an answer to Soviet propaganda that workers were dying of starvation in a wealthy capitalist nation, and being killed indiscriminately in the streets by its illiberal state agents. We disproved this by continuously improving the household wealth of all citizens decade after decade and expanding human rights, which we then used to pressure other nations into doing likewise. And through the formation of NATO, the U.S. sold itself as a reliable partner in democracy and capitalism.
This all worked quite well, wouldn’t you say?
Now consider the policy statements by the nascent Trump team, such as it is.
Paul Ryan, once unwilling to even campaign with Trump in Wisconsin, is now gleefully embracing the notion of dismantling not only the Affordable Care Act, but Medicare, the system that assures that the elderly can afford care when they are no longer active in the workplace.
The potential appointment of Senator Jeff Sessions of Alabama as Attorney General signals an outright assault on civil rights. No passive obstacle to expansion of rights, Senator Sessions has a history of attempting to criminalize those who attempt to increase voter turnout among Black Americans. He was considered too bigoted for a judgeship all the way back in 1986, much less the post-Ferguson era.
As for promotion of liberal democracy, Mr. Trump and several of his close confederates express admiration for Russia’s kleptocratic ruler Vladimir Putin, as well as Turkey’s Tayyip Erdogan, a leader who has recently been imprisoning journalists and academics by the thousands. Mr. Trump put a fine point on this by saying that the crackdown on Turkey’s civil society was just fine by him.
Finally and most seriously, the comments from Mr. Trump and allies such as Newt Gingrich about abandoning our NATO obligations are a slap in the face to any nation that makes a treaty with the United States.
The “Nationalist” government under Trump is thereby proposing that America abdicate its leadership of the global order. Mr. Trump clearly intends to renegotiate what American citizens can expect as rights under a heavy-handed Federal government, cease to promote democracy at home or abroad, and form new alliances based on an understanding that has not yet been communicated. (Trump’s announcement that he intends to normalize relations with the renegade Putin regime that just interfered in our election is a good hint, though.)
Now is the time for business to consider what this means.
Implications of a chaotic Nationalist world order
There are probably too many scenarios to contemplate when looking at a strategic shift of this magnitude. This is the United States disengaging from Europe, proving that it is unreliable at the negotiating table, going back on two and a half centuries of political progress. This doesn’t even cover the random and hostile approach being shown toward our many trade agreements, which will at the very least cause other nations to reconsider their economic strategies. Many chess pieces are in motion simultaneously and the only ridiculous scenario is the one where things remain stable and maybe we’ll have some tax cuts, hooray. All of the past administrations in recent memory have made mostly incremental changes within the stability of a solid national strategy. This is completely different. This is America throwing all of that away simultaneously and hoping it will Make Things Great Again, Or Something.
The bottom line is this: we have a global economy and a vast, complex network of supply chains. When Wall Street sneezes, the German banking sector catches a cold. When America goes in full on fracking without a matching demand for petroleum products, it’s Russia’s economy that takes a hit. Electronics manufacturing couldn’t just shift back to America in anything less that twenty years even if Washington and Beijing agreed on it today; there are too many trade relationships long-established in Asia, and it would be a Herculean effort to simply untangle them and send them somehow to Ohio. That this new government intends to run around with sledgehammers and smash things without concern for the future is going to have wide-reaching consequences to put it lightly.
I think the most mild scenario I can formulate with current data would involve America retreating from its international position and abdicating in favor of China, which would have the most predictable economic partnership available. China has already been forging major ties with African nations, following up in South America. They are a funny choice for global leader, but if the position is available, they might just apply. After all, China had the world’s largest economy for 19 out of the past 20 centuries, and they have not forgotten the anomaly. One can imagine they look forward to rectifying the situation.
Disruption is on the way. The notion that it will be benevolent for business because of a tax cut here or there loses sight of a much larger and more calamitous picture.