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Your guide to what Trump’s second term means for Washington, business and the world

At the core of Donald Trump’s and the Maga movement’s aggressiveness is a grim determination to recast the economic order. At the international level, economic openness is thrown out and bilateral but inconstant dealmaking is replacing multilateral rules. At home, tax cuts and deregulation are jarringly combined with heavy-handed dirigiste cronyism. All of it is pursued with an almost demiurgic intensity.

But this vision of the economy is contested, to put it mildly. So what about those who should be offering alternatives to the Maga economy? Demiurgic intensity is not the first thing that springs to mind, in this case. But that does not mean nothing is happening. It is more that for the non-Maga world it is hard to give up on the old consensus of multilateral openness and trust in markets — so to resort to Gramsci, the old is dead but the new struggles to be born. Trumponomics may be one of the morbid symptoms of the interregnum. But today I want to survey some of the efforts to give birth to a new non-Trumpian economics.

We can layer these efforts according to whether they are made by politicians, policymakers or academic economists. For the first category, consider the split personality of Kamala Harris’s 2024 presidential campaign, which exemplified the lack of direction among would-be opponents on Trumpism. Hers was a campaign in two halves: it started out with an economic populism focused on the cost of living and a promise to address price gouging, then panicked about scaring the horses, backed away from economic radicalism and shifted to rescuing American democracy from Trump. The inconsistency of the campaign means that people can blame her defeat on whatever campaign message they didn’t like, leaving the “economic populism or moderate centrism?” question unsettled. 

Don’t hope for a consensus any time soon on what wins elections against rightwing populists. Many approaches have been tried. French President Emmanuel Macron won in 2017 in what now feels more like a last hurrah for the world of yesterday, and see where that has got him. The UK’s Labour party has been trying a “responsible”, and rather conventional, economic approach to keep the Reform party at bay, but is now facing the choice of whether to “go big” in its Budget later this month. The pro-populists will point to Zohran Mamdani’s victory in the New York City mayoral election — so if you haven’t already, go and read my colleague Guy Chazan’s piece on what his ascendancy means. But, of course, a lot of Democrats won a lot of US races on Tuesday, so the conventionalists will find ammunition for their strategy too.

Joe Biden, of course, went big — but that didn’t help Harris. That brings me to the second dimension of the debate, which is the more technocratic one about the policymaking process. A number of Biden administration appointees have contributed reflections to a new study by the Roosevelt Institute. The title is telling: “Building a More Effective, Responsive Government” — among the lessons Biden veterans want to impart is that government dysfunction is real (they are talking about the US, but the point holds for many countries) and a real obstacle to making even the right policies work, let alone being acknowledged by voters. I won’t go into the details here, but the leitmotif is to pursue greater speed, scale — and boldness. An echo of the political school of “going big” then, but focused on the mechanics of the state.

But beyond the political and policy mechanics layers, the question remains what the policies should be. That is the question the instigators of the “London Consensus” try to give an evidence-based answer to. The product of that effort, which started with academic exchanges several years ago, has now been published in a hefty book and is being presented at conferences in Washington, London and elsewhere. The conveners of the work (London School of Economics experts Tim Besley, Irene Bucelli and Andrés Velasco) frame their work as leaving behind the “Washington Consensus” that enjoyed broad agreement in the 1990s and 2000s: open markets, hands-off policy, fiscal and monetary discipline and redistribution if needed.

Despite the name, the project doesn’t really want to replace the Washington Consensus with another potted policy prescription. Indeed, much of the message is “it’s complicated” — as it should be, since policy design is nuanced and depends on context (something the Washington Consensus did not do well). But the authors do offer a set of good principles for economists to guide policy design, reflecting lessons learnt from previous decades: don’t let places be left behind; people care about overall wellbeing including good jobs, not just their incomes; and the imperative of state capacity. But then the leading lights of Trumponomics largely agree with those principles. So the project must be to show a different menu of policies — one that preserves a degree of economic openness.

The London Consensus project does do this. Really more handbook than consensus, it contains a wealth of specific policy analysis that captures the state of the art knowledge about how the economy works. I encourage readers to peruse the (free!) book for the policy areas most relevant to them. Personally, I found particularly instructive the contributions on “productivism” and the importance of high-quality work, the role of activist fiscal policy as the insurer of last resort, the productivity impact of health on early childhood education, and the more sophisticated understanding of capital controls and “macroprudential” policies to manage international capital flows.

The thread running through all of this can be summarised as “the state is back (but it has to be smart)”. This makes it fair to see much of the London Consensus work as trying to rebuild an economics of the centre left. That is not to put in doubt the objective expertise of the work; it is more that what we have indeed learnt about what works for the economy aligns — or should align — quite nicely with the territory that centre-left parties usually claim as their own. At the same time, we should note that there are many possibilities for good economic analysis to command consensus across party or ideological divisions. Just this week a large collection of UK economic think-tanks and tax experts from very different places on the political spectrum have rallied behind a list of far-reaching proposals for tax reform that the government would be wise to follow.

What remains, however, is that we do not know what sort of economic programme will work both economically and politically, and in a sustained fashion. A quote from a Mamdani supporter in the profile I linked to above is telling: “He makes you feel like at least here, in New York City, we can have some control over our lives.” Taking back control, or variants of that message, is, of course, what brought rightwing populists success. But really delivering that control requires both the economics and the politics to work. Until we have a clear example of success — a political leader or movement that makes the economy work better again while retaining or growing political support — I think consensus will remain elusive, in London and elsewhere.

Other readables

● On the same topic, my colleague Rana Foroohar’s weekend essay explores where the US labour movement meets the country’s conservative Catholicism.

● In my column this week, I urge Europe to remember the needs of democracy when it considers deregulating digital services.

● A year of Donald Trump in charts.

● Will higher defence spending boost the European economy?