US lessons for Europe

06.11.20 Publication:

The outcome of America’s elections brings to mind a line from two famous American
entertainers, Stan Laurel and Oliver Hardy: “Another fine mess you’ve gotten me into”. The
trouble is, that this messy democratic outcome is unlikely to make us smile. What it does
do, even as the uncertainty is being sorted out, is to offer some lessons to Europeans and to
the rest of the world.

The first lesson is that the question of the incumbent’s competence or incompetence
in managing the Covid-19 crisis this year did not prove decisive. Certainly, it enabled Joe
Biden to win the popular vote, by what looks likely to be a larger margin than Hillary Clinton
won it by in 2016. But an outcome as bad as 230,000 deaths and constant signs of chaos and
confusion in the federal government still did not produce a landslide defeat for Donald

This is a surprise, not only because the opinion polls had consistently predicted a
larger victory for Mr Biden, partly on the basis of public anger at Mr Trump’s handling of the
pandemic. What it should remind us is that America’s outcome in terms of mortality is no
better nor no worse than that in most Western European countries.

A second lesson is that although many people do hold strong political views about
the coronavirus, the economy and jobs also matters. Trump’s unexpectedly strong support
confirmed that many voters, well beyond what is known as his ‘base’, remain sympathetic
to his tough talk about trade and immigration, and to a belief that a businessman and tax-
cutting Republican might be better for economic recovery than someone from the centre-
left. This offers hope to the centre-right in other countries, including Italy.

Again, let us not forget that Joe Biden has won the popular vote by a large margin.
But that is also explained by an unusually high turnout of Democrat and independent voters
who have been offended by the vulgar and often law-breaking conduct of Donald Trump
over the past four years. Given the fact that Trump’s trade wars with China have not
reduced US trade deficits and have not brought manufacturing jobs back from abroad, one
might have expected more of a swing to the Democrats. But the swing was quite minor,
especially in the votes for the House of Representatives and the Senate.

The third lesson, or perhaps message is a better word, for Europe is that although
American foreign policy will now become much more multilateral if Joe Biden does become
president in January 2021, the gains from this change must be expected to be quite modest
compared with the crises that are likely to confront all our countries during 2021 and 2022.
Certainly, President Biden and his administration will be friendlier to US allies, in both
Europe and Asia. But Biden’s ability to restore US leadership will be limited.

It remains possible that Biden’s Democratic Party could snatch a slim majority in the
Senate if it can win a run-off election in Georgia in January, but this looks unlikely. If it does
not do so, the result is that it will be difficult for the Biden administration to get any
expensive or controversial legislation passed by Congress. The Senate will be obstructive,
seeking to set up a narrative of Democratic Party failure ahead of the mid-term
Congressional elections in November 2022.

In many aspects of foreign policy this may not matter. If he chooses to, a President
Biden will still be able to rejoin the Paris climate accord, the World Health Organisation
(although this may require funding approval from Congress) and even the Iran nuclear deal.
But he will find it much more difficult to get any trade legislation passed or any substantial
international financial rescue initiatives.

This blockage could become important as the world emerges from the pandemic and
the associated global recession. All governments are going to end up holding much higher
public debts than before the crisis. But what could prove the world’s biggest economic issue
after the pandemic is the much higher debt levels in developing or so-called emerging
countries, in Latin America, Africa and Asia. While advanced countries should have no
difficulty in financing their high debts, this will not be true of developing countries.

Last time there was a third-world debt crisis, in the late 1980s and early 1990s,
American leadership and Japanese money combined together to create a solution. This
time, American intellectual leadership may be present but without the financial willingness
to recapitalise the IMF and World Bank or to sort out massive debt restructurings.

In this, as in other aspects of world affairs, China will now matter much more, and
we in Europe will need to take our own initiatives. The days of relying on America are gone.

Image by Clker-free-Vectore-Images from Pixabay