Both US and European policymakers have misdiagnosed what ails the global economy. It is not a short-run, cyclical problem curable with textbook Keynesian stimuli (and exotics like quantitative easing). Rather, it is a long-term structural disequilibrium caused by chronic trade imbalances — the result, in turn, of manipulated currencies, mercantilist practices and poorly negotiated trade deals. Enter, stage centre, Donald Trump.
Before the era of globalisation, which began in earnest in the 1980s, US managers improved efficiency by substituting capital for labour in domestic factories. As globalisation has taken hold, executives have offshored entire factories as a more effective means of maximising profits.
This offshoring trend is mirrored in statistics that reveal a rapid narrowing of the US manufacturing sector. In the 1970s, manufacturing employed 20 per cent of the workforce. Today, that number has dropped to a mere 8 per cent — with more than 5m manufacturing jobs lost since 2000 alone.