A year ago I wrote a piece (A scary new world?, Business Standard, June 19, 2017) on the new world ushered in by Donald Trump in the first five months of his presidency of the United States. In it I argued that the 70 years following the Second World War saw the rise and dominance of a liberal international economic order (LIEO) for trade, capital flows and some skilled labour, which helped drive the sustained expansion of world trade, cross-border capital flows and globalisation, which, in turn, were key ingredients for unprecedented world economic growth. Moreover, the LIEO was underpinned by an international political order dominated by the US-led “Western Alliance”, including Western Europe nations and Japan. Over the past decade or so this international economic and political order had encountered growing stresses and strains from various factors and forces, such as the long wars in Afghanistan and Iraq, the extraordinary rise of China as a global power, a massive refugee crisis in and from the broken states of West Asia and North Africa and persisting economic and financial damage from the Global Financial Crisis and the associated Great Recession. However, Mr Trump’s actions (and neglect) on trade, foreign policy and global public goods pose a new kind of threat to the LIEO and the Western Alliance, a startling one of repudiation of this order by its leader, the United States, after spending 70 years building and nurturing the system.
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