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The US Is Headed to a Pivotal Socio-Economic Crisis

Politics / Social Issues Jan 19, 2017 - 06:11 AM GMT

By: John_Mauldin

Politics

BY GEORGE FRIEDMAN AND ALLISON FEDIRKA : This year, the United States will be the main geopolitical power. And President Donald Trump will run it. This will be the first big shift to nationalism in US politics.

This rise in nationalism is global. Its rise stems from the rejection of the internationalist model. This has ruled international relations since the end of World War II.


The US does not answer to any regional blocs or international powers. And yet, the US will still see a strong rise in nationalism.

Trump’s election portends an economic crisis

Since its founding, the US has met a crisis every 50 years. The most recent was the election of Reagan in 1980.

About ten years before a crisis, new socio-economic problems emerge. Trump’s election does not mean a crisis. But it does foresee the arrival of one in the 2020s.

The main inside economic problem for the US today is less middle-class buying power. A worker in the lower-middle class earns about $2,000 a month after taxes and has employer-provided health care. That person would not be able to afford more than rent for an apartment.

Economic chaos has political effects

One group badly hit by less buying power is the white working class. It can be thought that these pains would affect their voting. Trump knew this demographic. He used it as his base to win.

The rise of US nationalism shows that lengthy economic chaos must have political effects. They play out where domestic socio-economic crisis meets global economic slowing.

The 2008 financial crisis shook core ideas that upheld the benefits of free trade. The crisis’s other two big effects were economic slowing in industrial countries and more unrest in export-dependent countries.

This has been an issue since the founding of the nation

Free trade now must prove its worth. Protectionism—economic nationalism—has gained speed.

The balance of free trade and protectionism has been a major political issue in the US since the country’s founding. The US economy is mostly safe from a decline in exports, which make up 12.6% of GDP. But the crisis made space for a rethink of trade deals.

These trade talks tied to the US are over less buying power and standards of living.

US internal stresses will determine foreign policy

The debate about economic survival bleeds into big questions. These are immigration policy, military commitments, trade deal terms, and foreign aid—among others.

Today, nationalism looks better. For those who lost after the 2008 crisis, internationalism has not solved the world’s political, security, and economic crises. It’s also seen as the cause of those problems.

In the US—and at a global level—nationalism may not win. But this needs internationalism to present itself in a way that seems like a real option.

Except in war, foreign policy shifts do not happen quickly in the US. The US is under internal stresses that will be seen in its foreign policy.

Grab This Free Report to See What Lies Ahead in 2017

Now, for a limited time, you can download this free report from Mauldin Economics detailing the rocky roads that lie ahead for three globally important countries in 2017—and how the economic fallout from their coming crises could affect you. Top 3 Economic Surprises for 2017 is required reading for investors and concerned citizens alike. Get your free copy now.

John Mauldin Archive

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