Forum newsletter: Chaos as an opportunity? What comes after Trump

Dear friends and colleagues, 

Donald Trump was elected on a big promise: that he is in control. This alone raises fears that things will escalate again and again – whenever anything looks like a loss of control. As in the past few days, when panic broke out on the financial markets and Donald Trump seemed ready to give in on the tariff orgy – only to then escalate his stance towards China. On the grounds that the Chinese had countered Trump’s tariffs (and attempts to control them).

If this is true, America and the world could be facing disaster. Then every obstacle for Trump could lead to a new unholy demonstration of control. The only option would then be to limit the damage as much as possible. However, it might be worth doing something else at the same time: preparing for the time after Trump. Former US Secretary of Labor Robert Reich recently wrote that his hope is that this “this horrific experience will lead to a new era of fundamental reform — of our economy, our democracy, and our commitment to social justice and the rule of law.”

This is supported by the fact that there have already been moments in history when terrible catastrophes have ultimately led to a stronger will for something new and better – for example, after the Second World War, when the collapse led to a new attempt to put the world in better order: through a Bretton Woods system with international organizations such as the United Nations; and through an economic policy that, in the spirit of the New Deal, aimed to learn the lessons from the excesses of overly uncontrolled financial markets everywhere.

It would be better for all the world if escalation did not occur at all. Even then, there is much to be said for already thinking about and preparing for the new era that Robert Reich has in mind. If only because even if Trump were to fail soon, the original problem would still not be solved: that a lot of people in all Western industrialized countries have lost confidence in democracy and the control of their own and society’s destiny. It is more urgent than ever to develop policies that ensure this – instead of just doing as the US president is currently doing with unholy demonstrations of power.

We began discussing what such policies could look like with the world’s leading thinkers at the Berlin Summit last spring – and recorded them in the Berlin Declaration. The circumstances are different today. The questions remain: what does a better industrial policy that proactively avoids fatal regional disruptions look like? What does a climate policy look like that resonates with people as something positive? And what could a global order look like that doesn’t just naively rely on the supposed miracles of free trade?

All of this is on the agenda of our second Berlin Summit, to which top researchers and practitioners such as Harold James, James Galbraith, Daniela Gabor, Francesca Bria, Paul de Grauwe, Brad Setser, Simon Jäger and many others have already confirmed their attendance. The summit starts with smaller expert sessions – and is open to the public on June 13. Simply write an e-mail to info@newforum.org to put your name down.

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As far as a better climate policy is concerned, one answer could lie in the lessons learned from what the Biden administration tried to do with the Inflation Reduction Act (IRA): a policy that focuses on subsidies and investment incentives for climate-friendly behavior instead of higher CO2 prices, as the new federal government also upholds. In other words, positive rather than negative incentives. Isabella Wedl and I discuss whether this works in our recently published Forum paper. Conclusion: A positive climate policy of this kind is effective in terms of turning away from climate-damaging behavior. It also defuses the social time bomb of higher prices for petrol or heating with oil and gas, for example. It’s more about the right mix of instruments.

In a guest article for SPIEGEL Online, we tried to explain why this is highly relevant for the new German government: after all, the expansion of the emissions trading system to include transportation and housing (ETS2) in 2027 threatens to cause price hikes for petrol and heating, which Black-Red could end up stopping in a panic – without having a positive alternative. We will also be talking about this in our next New Economy Short Cut at the end of April. Date to note: April 29 in the afternoon.

Have a great weekend,

Thomas Fricke

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