How World Leaders Ruined the Global Economy

They took the best growth picture in a decade and put us in danger of recession.

Why are so many key global leaders pursuing so many stupid economic policies?

As recently as January 2018, the International Monetary Fund issued one of its most upbeat economic forecasts in recent years, extolling “broad based” growth, with “notable upside surprises.”

By last month, the fund had sliced its forecast for expansion this year to 3.2 percent — a significant falloff from the 3.9 percent projection reiterated just six months earlier — and had pronounced the economic picture “sluggish.” American investors are more concerned; the bond market is sounding its loudest recessionary alarm since April 2007.

The deterioration in the economic picture is not the consequence of irresponsible behavior by banks or a natural disaster or an unanticipated economic shock; it’s completely self-inflicted by major world leaders who have delivered almost universally poor economic stewardship.

The trade war initiated by President Trump sits firmly atop the list of bad policies. But Brexit has tipped Britain into economic contraction. With European governments unwilling to pursue structural reforms, the continent is barely growing. President Xi Jinping of China has focused on standing up to Mr. Trump and solidifying his own power. After a promising start reforming the economy, India’s prime minister, Narendra Modi, has turned instead to oppressing his country’s Muslim minority.

None of this was necessary. As the January 2018 I.M.F. report indicated, the world economy was firing on all cylinders — “the broadest synchronized global growth upsurge since 2010” — as jobs were being added and inflation remained subdued.

Yes, Mr. Trump’s trade war and Brexit loomed, but amid hope that the former would prove empty and the latter would be softened.

Not so today.

Often against the recommendations of his more sensible advisers, Mr. Trump has implemented the country’s most protectionist actions since the 1930s. As a result, world trade has begun to fall for the first time in a decade, with noticeable economic impact. Last week, Goldman Sachs cut its already modest projections for fourth-quarter growth to 1.8 percent from 2 percent.

That’s a far cry from the “4, 5, 6” percent that Mr. Trump talked about just before his tax cut passed.

Nor has that been Mr. Trump’s only misstep in economic policy. Instead of nurturing growth with important investments like a robust infrastructure program, Mr. Trump deployed his political capital to secure tax cuts that disproportionately favored business and the wealthy.

The “sugar high” they produced quickly wore off. And now, instead of developing better policies, the president has chosen to attack the Federal Reserve, whose independence is cherished by investors, business people and economists.

Boris Johnson, Britain’s new prime minister, abandoned his predecessor’s notion of a “soft Brexit” that would have maintained some ties with the European Union. Instead, he reaffirmed his promise that his country would leave the E.U. on Oct. 31 with or without a deal. The pound quickly fell to its lowest level against the dollar since 1985. (It has since recovered slightly.)

Then there’s China. By virtue of both its remarkably fast industrialization and its protectionist policies, the nation has long been a trade threat. But four years ago, the government issued its “Made in China 2025” economic manifesto, which put in writing China’s plans to attain a leadership position in key new sectors, including robotics, pharmaceuticals and aerospace.

The notion of China using its state power to take on important American and European industries instead of pursuing market reforms set off alarm bells across the political spectrum and provided a concrete underpinning for Mr. Trump’s trade confrontation.

Mr. Xi, rather than acknowledging China’s protectionist practices, has proved unwilling to accept a new trade agreement with effective enforcement provisions. That has raised doubts about whether China is seriously interested in reforming its unfair trade practices — keeping key markets fully or partially closed, using state subsidies to favor its companies, forcing American companies to transfer technology to China and the like.

Of course, at least in the world’s democracies, voters bear substantial responsibility for electing these inadequate leaders. The rise of populism as a reaction to disaffection about economic and social conditions has been well documented as a principal driving force.

Occasionally, good choices have been made, such as the election of President Emmanuel Macron of France. But even that has not led to progress; public support for Mr. Macron turned to opposition when he instituted the much needed policy changes that he promised.

Any chief executive officer who botched his or her job as badly as most of these leaders have would be fired. Let’s hope that voters come to that realization when given the chance.

In Defense of Liberalism

Staff writer for The New Yorker, Adam Gopnik, also author of A Thousand Small Sanities: The Moral Adventure of Liberalism Basic Books (Basic Books, 2019) argues that “liberalism” is not a political ideology, but a way of life.

9:30 In France, Emmanuel Macron attempted a Green New Deal with gasoline price hikes and faced revolts.

A Star Graduate of France’s Elite School Wants to Close Its Doors

President Emmanuel Macron suggests shutting the École Nationale d’Administration, a symbol of cronyism for many protesters

STRASBOURG, France—One school has been the cradle of the French establishment for decades, grooming future presidents, prime ministers and chief executives.

Now, one of its most illustrious alumni, President Emmanuel Macron, wants to shut his alma mater, the École Nationale d’Administration, or ENA, an institution that has become a symbol of France’s close-knit elite and persistent class divide.

Mr. Macron aims to placate yellow-vest protesters who have bedeviled his government for months, accusing him of paying too little heed to the economic pain of the working and rural class.

ENA has become a particular target, along with its graduates, known as énarques.

The president’s proposal comes at the end of months of high-profile public debates he organized in response to the demonstrations.

“We need to abolish ENA,” Mr. Macron said in April.

The school’s closure would be part of a broader push to overhaul France’s education system for high-ranking civil servants in an effort to improve opportunities for the underprivileged. Mr. Macron has pledged “to build something new that works better,” but hasn’t provided further details.

ENA was designed as a meritocracy to open better opportunities to all students regardless of their background. But critics say the school has become a breeding ground for cronyism, perpetuating a social pecking order that allows énarques to monopolize top positions in society. They run the prime minister’s office, the finance ministry, the central bank, two of the highest courts and many top private-sector companies. Three of France’s past four presidents are graduates of the two-year program.

“It’s a very French hypocrisy. The system is egalitarian on paper but unequal in practice,” said Jean-Pascal Lanuit, a senior official at the culture ministry and a former ENA student.

But many believe shutting ENA won’t change an elitist culture perpetuated by a two-tier education system. On one side, there are highly competitive institutions known as grandes écoles, public and private schools that are akin to the U.S. Ivy League schools, including engineering school École Polytechnique and business school HEC Paris.

On the other are universities open to almost everyone, but with sometimes crowded classrooms and crumbling facilities.

ENA was founded after World War II to better train high-ranking civil servants and open top government positions that had been reserved for “wealthy students living in Paris,” according to a 1945 government document. The creation was orchestrated by the then-general secretary of the French communist party, under Charles de Gaulle’s temporary government.

.. The Strasbourg-based school recruits about 80 students every year—compared with 2,000 undergraduates at Harvard University—based on a rigorous competitive entrance exam that includes five written tests lasting as long as five hours each in law, economy, social issues and public finances.

Tuition is free and students receive a monthly stipend to pay for books and housing.

But critics say ENA counts few students from rural, low-income families, and most current students are young white men.

The main reason, critics say, is the growing inequality of the French education system. Indeed, most ENA students have attended France’s top high schools and one of the best preparatory classes for the entrance exam. As a result, instead of promoting social mobility, the system ends up subsidizing the education of the rich with taxpayers’ money.

Many ENA students come from similar neighborhoods and attended the same schools. “I knew almost everyone there when I arrived in school,” said Florian Paret, a 27-year-old Parisian and second-year student at ENA, who graduated from the elite Paris Institute of Political Studies.

There are fewer opportunities for social advancement today compared with 40 years ago, said Ségolène Royal, a former minister and socialist candidate for the 2007 presidential elections who attended ENA and graduated in 1980.

“I’m not sure that it would have been possible for me today to follow the same path because there’s a kind of state aristocracy that has established itself,” said Ms. Royal, who came from a middle-income family in eastern France, recently. While at ENA, she met François Hollande, who would become her long-term partner and French president.

Once inside ENA, competition is fierce because top-ranked students can cherry-pick the most prestigious government posts upon graduation, including working at France’s highest courts or powerful state auditing bodies.

“Competition is part of the school’s DNA,” said Alexandre Allegret-Pilot, 30, who had degrees in biology, law and business before entering ENA.

After they graduate, énarques must work for the government for at least 10 years. If they leave earlier, they need to partly reimburse the school for tuition; usually private companies that hire young énarques pay back ENA as part of the hiring compensation.

Today, more former students move between the private and public sectors, deepening the perception that énarques monopolize top positions. After joining the state auditing body, Mr. Macron worked for private bank Rothschild & Cie. from 2008 to 2012, before moving back to government.

The vast majority of énarques, however, work for the government for their entire career. Few actually run for office, even if the school is known for producing presidents and ministers.

“ENA is being used as a scapegoat,” said Joachim Bitterlich, a former German diplomat and member of ENA’s board, who graduated in 1974.

More recently, ENA, which accepts a few international students a year, has sought to broaden its student body, notably by creating preparatory classes for the entrance exam for students from underprivileged areas.

“ENA can change,” said Daniel Keller, who heads the alumni association. “But I’m all for preserving the ENA brand. It’s a label that has value.”

It will be up to Frédéric Thiriez, an énarque Mr. Macron chose in April to lead the overhaul of France’s civil servants’ training.

Even if ENA were to close, it isn’t clear if that will be enough to appease the yellow vests.

“That’s secondary,” said Theo Feugueur, a 19-year-old law student in the Paris region, who takes part in yellow-vest protests every Saturday. “He should abolish all the grandes écoles.”

 

A Populist Surge Is Pulling Three U.S. Allies Into Political Crises

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Leaders in America’s top 3 European Allies face Crisis

  1. Britain: Teresa May tries to manage a Brexit vote motivated by anti-immigration
  2. France: Emmanuel Macron faces rioting in the streets over a carbon tax
  3. Germany: Angela Merkel has to step down as leader amid backlash over middle east immigration