02/09/2017 10:21 am ET


Populism Chokes Economic Growth- by Jerry Jasinowski

President Trump is increasingly described as a "populist" and I believe it is almost accurate. The question is - where will Trump's "populist" agenda lead the country? There is no formal populist party or established populist ideology, but there are certain strains that remain relevant.
There have always been populists on the American political scene, though I believe President Andrew Jackson is the only one who parlayed that outsider personality into the White House (1828). Certainly, William Jennings Bryan of Nebraska was a populist running for the Presidency three times on what he called the "free silver" platform. His theme was that the gold standard, then the basis for U.S. currency, was a conspiracy of the rich against working people.
There is a nativism in populism that inevitably comes out expressed as hostility or distrust of foreign people, which obviously is reflected in Trump's recent ban on immigration. One critical problem with the ban is that an unfocused ban on immigration will directly harm innovation and economic growth, which is why 160 high tech CEOs have signed a letter opposing it.
This relates in turn to the anti-trade and general isolationist tendencies of populists, which Trump not only embraces but promotes. The problem is that there is a 90 percent positive correlation that shows that globalization has contributed substantially to world economic growth in the last couple of decades. The movement of products and services across national borders creates jobs and wealth. It has been, and continues to be, a wonderful force that has lifted hundreds of millions of people from abject poverty. Trump's anti-trade stance can only destroy jobs and opportunities, and reduce our standard of living.
The one strongest theme that stands out among Jackson, Bryan and now Trump is a demand for cheap money. Jackson disbanded the national bank and Bryan tried to disband the gold standard. We have already seen President Trump calling for a cheaper dollar. It's just a matter of time before he will be criticizing interest rate increases by the Federal Reserve.
All of this is likely to cause a collision between President Trump's populism, including his desire to increase economic growth by tax cuts and spending increases, and growing inflation and interest rate pressures that will inevitably choke off growth. The sheer randomness of his actions to date do not constitute a coherent program, an unfocused populism is likely to harm the stock market and choke off economic growth.

Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements. February 2017