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Green Templeton College | Oxford

Professor Kenneth RogoffOn Tuesday 9 May, Green Templeton College together with the Department of Economics hosted a panel of distinguished economists to debate the early economic consequences of Trumpism and how his policies in key areas, such as trade, tax, finance, and monetary policy, are likely to develop. The speakers included Professor Kenneth Rogoff, the Visiting Sanjaya Lall Fellow, a Professor of Economics and Public Policy at Harvard University and a household name in for any undergraduate economics student who undoubtedly owns a well-thumbed copy of Foundations of International Macroeconomics. Rogoff is the recipient of the 2011 Deutsche Bank Prize in Financial Economics and has served as an economist at the International Monetary Fund.

Rogoff was joined on the panel by Professor John Muellbauer and Martin Wolf. Muellbauer, a Senior Research Fellow of Nuffield College, Professor of Economics, and a Senior Fellow of the Institute for New Economic Thinking at the Oxford Martin School, is known as one of the world's pre-eminent macroeconomists. His 1980 paper with Angus Deaton, An Almost Ideal Demand System, in the American Economic Review was selected as one of the top twenty papers published in the first one hundred years of that journal. Wolf is the chief economics commentator at the Financial Times, London and was awarded the CBE in 2000 for 'services to financial journalism'. He is widely recognised as one of the most influential economic columnists, and quipped that he has previously been invited to comment on Distinguished Economists Amartya Sen and Paul Krugman, but wouldn't say whether he was going up or down. The panel was chaired by Vincent Crawford, the Drummond Professor of Economics at All Souls College.

Rogoff began by saying that while Trump has been recognised as being politically savvy, his economic competence is still an open question (even if his temperament is not). The silver lining is that Trumponomics is a work in progress, and while there are some obvious deep concerns, such as his limited display of constitutional knowledge, racism, and sexism, his economic stance is unclear. Will Trumponomics produce or coincide with growth, or will it end in a classical populist macroeconomic mess with high inflation and severe debt problems? Rogoff argued that Trump isn't wrong on everything. Over-regulation is a problem and Trump's gut instinct to de-regulate has the potential for productivity gains. Furthermore, a clean-up of the corporate tax system seems to be a low-hanging fruit, and simplification of individual taxes is desperately needed. Indeed, the tax system seems so complicated that even Trump himself isn't able to release his tax returns for the last few years, Rogoff joked. However, his optimism soon ran out as he addressed bigger concerns such as trade and Federal Reserve independence. Trump campaigned on the premise that he would bring manufacturing jobs back to the US. What Trump doesn't seem to realise is that the idea of renegotiating trade deals on a country-by-country basis is extremely dubious at best, and anti-trade policy could bring disastrous effects. On the topic of the Federal Reserve, Trump has said everything from bringing back the gold standard to interest rate targeting, so his policy stance is again unclear. However, he will be able to replace most of the Federal Reserve board over the next year, raising concerns about their independence, particularly in the post-Yellen era. Finally, Rogoff commented on the potential for Trumponomics to undermine the pre-eminent role of the dollar. By many measures, the dollar plays a more important role today than it did under the fixed exchange rate Bretton Woods system, with a majority of countries using the dollar at least as a benchmark currency. Increasing volatility in the dollar could thus wreak havoc on the global economy.

Muellbauer largely echoed Rogoff's remarks, adding that the environment could be the single worst aspect of Trump's presidency. Climate change and economics are profoundly connected, and Trump doesn't appear to understand the climate at all. Scientists realise that there are severe amplifying feedback loops in the climate system - threatening mass species extinction, major sea-level rises, drought, and other disasters. Given his policy changes already, the risk of rapid, catastrophic climate change is thus large. Muellbauer remarked that we seem to have appointed a bull, not just to be in the china shop, but to actually run the china shop, when it comes to climate change. What offers perhaps a bit of hope is that the economic weight of businesses promoting the amelioration of greenhouse gas has potentially grown large enough to overcome the weight of fossil fuels promoters who are trying to manipulate Trump.

Wolf took a harder line, calling Trump a "truly horrifying individual on every conceivable level". Wolf finds only one advantage in Trump - the second most popular Republican in the primaries was Ted Cruz, who in Wolf's view would have been significantly worse, because "a deranged fanatic who believes in what he says is significantly more dangerous than a deranged fanatic who doesn't actually believe anything he says, and may not even be a fanatic, except about self-promotion". Wolf's address can be distilled into The Good, The Bad, and The Ugly. On the one hand, there is a chance that Trump engages in a programme of domestic spending on infrastructure, although this seems ever less likely. On the other hand, the risks of his presidency are huge fiscal deficits, rising inflationary pressure, a soaring dollar exchange rate, rising global imbalances, and trade wars. And if we're truly pessimistic, Trump's era could see the total destruction of global co-operation.

It appears that the central tenants of Trumponomics are still very much open to debate, and will have pervasive effects on almost everything that is important in modern economics. It is difficult to speculate, not least because Trump himself is as changeable as the weather and appears to do most of his policy briefing via Twitter at 3 am. There is widespread agreement among economists that strong institutions are essential to long-run growth, and the undermining of these institutions is without question the primary concern economists hold regarding Trumponomics.

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