Washington: Could the US presidential race be bad for the world economy?
That is a distinct possibility, according to some experts who believe a new mood of American isolationism could emerge from voter discontent over economic issues and the campaign rhetoric it has spawned.
From condemnation by John Edwards, a leading Democratic contender, of “corporate greed”, to the little-guy appeal of Mike Huckabee, a Republican contender, experts say the campaigns for the November election are picking up on the uncertainties that ordinary Americans increasingly face in the impersonal world of economic globalization.
“Globalization has had a significant impact on public optimism about the economy and public confidence in the future,” said Norman Ornstein, political analyst at the conservative American Enterprise Institute. “It’s given people the sense that their safety net’s been shredded.”
The result has been a long list of voter anxieties, including manufacturing job losses, stagnant wages, unsatisfactory health care benefits, illegal immigration, and dangerous Chinese imports.
Reaching out: Democratic presidential hopeful John Edwards.
“We’re paying the price today for the overselling of globalization, the fact that those who pushed globalization in both parties were unwilling to face up to the downside risks and take actions to mitigate them,” said Joseph Stiglitz, a Nobel Prize-winning economist. “It also in part is a consequence of the failure of the Bush administration to put in place adequate regulatory standards in a host of areas,” Stiglitz said.
Souring public sentiment could mean a reduced US role in the global marketplace if voters start to demand a change in economic course, analysts say.
Eurasia Group, a New York consulting firm, on Monday called US resistance to globalization as the greatest political risk for global markets in 2008—topping Iran, Iraq and terrorism.
The firm, which evaluates political risk for its clients, warned that presidential campaign rhetoric could contribute to a dramatic increase in US protectionist sentiment if accompanied by a major recession.
“What we’re seeing is that there is a broader benefit from a populist, and frankly, a neo-isolationist streak” in campaign points, said Ian Bremmer, Eurasia Group’s president.
“We’re going to get the strongest sort of populism from people like John Edwards,” he said. “But we’re also seeing it with the Huckabee campaign and the Ron Paul campaign,” he added, referring to the long-shot Republican candidate.
Voter discontent alone probably would not force a major turn towards protectionism, analysts said, but it could make it more difficult for US politicians to agree to new trade deals.
Voters have already seen a lot of campaign talk about the perils of trade from Democrats, including senator Hillary Clinton, who has pledged to review all existing trade pacts if elected.
But Stiglitz said Democrats were likely to ease popular discontent by rebuilding the social safety net through health reform and other initiatives.
“The danger I see is on the right,” he said, explaining that a continuation of the conservative economic policies favoured by President George W. Bush risked raising discontent further. “If you go further down the Bush route, you will get a backlash because it’s not true that everybody’s better off,” Stiglitz said.
Ornstein agreed that a dramatic economic deterioration could raise the odds of a protectionist backlash. “You might see a trade war developing,” he said. “You could see other countries, including China, getting mad enough to take measures against us.”