The insurrection at the Capitol this week capped off a shameful four years for the United States. That shame took many forms, but one not to be overlooked is the way US President Donald Trump’s administration ran roughshod over the country’s reputation as a good, stable place to do business.
Can President-elect Joe Biden repair the damage?
Recall, Trump recklessly pulled the US out of trade deals and diplomatic agreements; started a futile and costly trade war with China; and alienated global trading partners. And, of course, he failed to control a public health disaster that’s led to the deaths of more than 360,000 Americans, increased hunger and poverty, and destroyed untold numbers of businesses. The White House’s draconian immigration crackdown, meanwhile, discouraged people who might have come to the US to start a company or further their education from emigrating here. Just this week, there was another embarrassment involving Chinese companies and the New York Stock Exchange.
Then came the riot on Wednesday.
After a streak that lasted more than two centuries, the transfer of power in the United States has not been peaceful this time around. Until Thursday afternoon, Trump failed to concede. He didn’t say he’d participate in an orderly transition of power until around 4am Thursday, hours after his supporters stormed the Capitol. He’s maintained to his millions of his followers that the incoming administration is illegitimate, raising the prospect of more civil unrest in the future.
So far, the economic fallout has been ― shockingly ― minimal. The stock market has been unbothered; it’s been booming for months, as some companies cash in on the pandemic and the Federal Reserve keeping the money flowing.
By and large, economists and market experts think the United States under a new administration, not enthralled to radical right-wing demagoguery, will pull us back from the brink.
But not everyone is so confident. At least one prominent economist believes that this latest civil unrest will play a role in convincing investors to put their money elsewhere. “If you could invest anywhere in the world, why would you want to invest in the US when there are safer environments?” asked Carl Weinberg, chief economist and founder of the research group High Frequency Economics.
Weinberg believes the insurrection at the Capitol has made things worse, and it’s not clear yet if a new administration can repair the damage.
“The fallout from yesterday’s events caps a four-year decline in the cachet of being American,” he said. “It further diminishes, reputationally, everything we built up since the Second World War.”
Weinberg puts out a daily research note about the global economy, but he didn’t publish one on Wednesday — the first time he’s suspended publishing since 9/11. Instead, he wrote a missive entitled “Standing up for Democracy,” in which he and his coauthors called for peace and reconciliation.
“[W]e believe that the United States’ institutions are strong enough to survive this insurrection,” they wrote, but we still have to get through the next couple of weeks. There still exists the possibility of further civil unrest, calls for Trump’s removal from office, and a chance that the inauguration could be less than peaceful.
“The fallout from yesterday’s events caps a four-year decline in the cachet of being American.”
- Carl Weinberg, chief economist and founder of High Frequency Economics
Most economists and market analysts are more optimistic. After all, throughout the pandemic — even with record unemployment and widespread hardship — stocks have done great. Jeff Bezos just keeps getting richer.
Apparently investors believe that in two weeks, Biden will return the country to “normal;” that everything will be fine. On Wednesday, amid bloodshed in Washington, DC, analysts were more interested in the results of the Georgia election, which put control of the Senate in Democratic hands.
“Scenes like we had [Wednesday] are extremely detrimental to the image of the United States and lead to questions internationally about how strong and how safe US democracy really is, but most leaders are reassured that within a couple weeks, you’ll see a transition of power that will bring a new president with more traditional values and less of a dangerous ideology,” said Gregory Daco, chief US economist at Oxford Economics.
If Trump had been reelected, the market might have reacted differently, Daco said. But Democrats set to take control of the White House and both houses of Congress, he said there’s a general sense that economic growth is on the way through more spending.
But if there’s more social unrest in the coming days, that could change, Daco said: “The last few weeks have taught us to never say never.”
Even though, in so many ways, the events this week were not surprising or out of step with the political violence the US has seen before — white rage has frequently turned violent in this country — they’ll be seen as exceptional, and therefore not damaging to the national business climate.
Indeed, the entire past four years are going to be viewed as an aberration, said Gbenga Ajilore, a senior economist at the Center for American Progress. Long-term, he said, our economic reputation will hold.
“I think Biden comes in, says immigrants are welcome back, and people will come flooding back in,” he said. “Yeah, you may not have wanted to go to Harvard a year ago. But if Harvard accepts you next year, you’re going.”
We wouldn’t survive another Trump, Ajilore said, “but I don’t think there is another Trump out there.”
Ajilore also pointed out that part of getting “back to normal” will mean a lot of those people responsible for the insurrection will face no consequences, calling it a “sad form of stability.”
“You have all these people that are now going to be on ‘Dancing with the Stars,’” he said, using one example of the ways Trump administration alumni have already normalised themselves in their post-White House lives. He added that, “for a lot of people,” the culmination of Trump’s presidency in a riot wasn’t really all that shocking: “It confirmed what we knew.”
Weinberg is far less certain about the country’s long-term prospects. There are millions of people who believe Trump when he says the election was stolen from him. A new administration won’t change their minds.
“Unless you make a change in people’s confidence in the competence of government, you haven’t changed much,” he said, adding that we need to come together. “We need to get our tushies in gear.”
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