Tories vs GOP

Groningen, a.d. IV Kal. Nov. MMDCCLXXI A.U.C.,

As I described in my last post, it is quite common for conservative parties to draw away attention from poverty and inequality, and instead to focus on issues such as family values, public decency, jingoism, safety or migration. I also argued that the Conservatives in the UK are doing exactly this and a former Republican argues the Republicans are doing the same in Washington Post. However, this can be a risky strategy.

In my last post, I argued that I could not see the Conservative party survive in the long-run unless hard Brexiteers change their course on Brexit. The economic interests of the wealthy supporters of the Tories are to be integrated into the EU, and hard Brexit does not allow this. So either Boris Johnson and co. have to give up their dreams of a hard Brexit, or they will have to leave the party and start their own party, or the wealthy will have to leave the conservative party, taking with them a lot of funding and very old networks. Either way, the coalition of voters which the Conservative party currently represents is unstable, and it makes no sense for hard-Brexiteers and wealthy Tories to stick together.

So does this also hold for the Republicans in the USA? I do not think so. Despite everything, the GOP is still somewhat in control of economic and trade policy. While plenty of criticism can be heaped on President Trump, he has been handing out a lot of cash to the wealthy. His trade policy so far may have hurt some producers, but this has been offset by massive tax deductions and deregulation.

In other words, there seem to be some differences between the strategic situation of the GOP and of the Tories. First of all, Trump has made a lot of noise about how foreign countries hurt the USA, but most producers have not been hurt that much by his policies. Hard Brexiteers want to leave the common market, while the USA has decided to stay in NAFTA after some renegotiations. The USA opted out of the Trans-Pacific Partnership free trade agreement, which may hurt American companies in the long run, but that is nothing compared to how long it will take for the UK to renegotiate trade agreements with other countries.

Moreover, the USA is a much bigger country than the UK is, and it is much bigger compared to its closest trade partners as well. This means it is much less dependent on foreign trade, and it has much more muscle to negotiate with its trade partners.

If the USA decided to really implement trade barriers on all goods, except the ones it cannot produce itself, it would still remain an incredibly prosperous country. The USA has the economies of scale to not desperately need to trade, and geography-wise it has areas with absolute advantages in production for many different products. Meanwhile, the UK is just a medium-size country. It could never hope to predominantly live without trade with its neighbours.

Besides, the USA is not trying to live without trade, it is trying to change the terms on which trade occurs, and it has the negotiation power to do so. The USA absolutely dwarfs Canada and Mexico so it could put heavy demands to renegotiate NAFTA on those countries. It cannot pull the same tricks with China and the EU, but with the EU it does not really seem to try to, and the trade relationship with China objectively is a mess in need of restructuring. Meanwhile, the UK’s main trading partner is the EU, which is multiple times its size. Hard Brexit would mean the UK opts to crash out of its most important trade relationship by far. In other words, the impact of a hard Brexit on UK producers would be terrible, and much more unpalatable to them than Trump’s trade policies are unpalatable to American companies.

Meanwhile, to the degree that Trump’s trade politics hurt American companies, it has been offset by massive tax cuts and deregulation, to a degree even unthinkable in the UK. Tax-cuts alone amount to $1.5 trillion, predominantly landing with companies and the rich. Moreover, all sorts of deregulation make it easier for companies to produce goods and services while disregarding negative externalities like pollution and financial crises. Labour and consumers’ rights and safety are being reduced on a massive scale as well. In other words, Trump is great at distracting his less well-off voters with all sorts of xenophobic nonsense and a lot of big talk about bringing jobs back from abroad, while he is hurting their safety, health and pocketbooks to the advantage of large corporations. The Tories cannot hope to offset a hard Brexit with

Therefore I think the GOP is a healthy party from a strategic perspective. It implements policies that are supported by its most important supporters. The rich are happy because they are becoming richer very quickly, while his less-informed voters are happy because Trump is Making America Great Again (whatever that means to them). Importantly, the GOP is still in control of the economic policies it is pursuing. Major GOP figures still know for whom they are there: their own wallets and the wallets of their biggest financial supporters. Meanwhile,  Theresa May is not in control of her party and there is a growing insurgency within the Conservative party in the UK. The insurgents are advocating for a hard Brexit, while this is much more unpalatable to rich Tories than Trump’s trade politics are to rich Republicans for multiple reasons. This means hard Brexit is much, much harder to compensate with deregulation and tax cuts for companies and the rich than Trump’s trade policies are. Therefore I think that rich Tories and the hard Brexit camp cannot continue to be in the same party unless the latter back down. In short, the GOP is doing fine, it is hugely successful from its own point of view, while the Conservative party is in much more trouble.

Bottom line: The GOP is doing fine. It is able to dupe most of its electorate in order to cut taxes and deregulate. The Tories are in a less envious position.




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