HOUSE_OVERSIGHT_026639.jpg

economies. In my view, Mr Trump’s victory will have many social, geopolitical, and economic consequences, but for investors I think he will start a period of ‘Economic Olympics’, whereby the federal governments around the world will take more responsibility and be more proactive to help their ‘national teams’ to become more competitive in this globalised world. (1) Free trade is in theory good for economic growth. But there are other policies (such as well-directed R&D, efficient investment, an effective educational system) that are also extremely important for long-term growth, but have been ignored in the past 15 years because of the globalisation fad. A slowdown in trade globalisation might not be bad for the global economy, if policy makers replace this engine of growth with other structural improvements. But while globalisation is more about ‘growth beta’, other types of structural reforms are about ‘growth alpha’ and federal/central governments around the world will need to make a greater effort at leading the economies to prevent them from falling behind. This is like a government-led program to win Olympic medals, without doping by central banks. (2) A client kindly brought to my attention an interesting report done by the Harvard Business School that touches on the idea mentioned above (‘Problems Unsolved and a Nation Divided: the State of US Competitiveness 2016’). In it, several sensible and consequential points were made: ‘The pressing need for a national economic strategy... Given the significant challenges facing the American economy, the U.S. needs a national economic strategy more than at any other time in recent history. A strategy is an integrated set of priorities that builds on strengths while acknowledging and tackling weaknesses... The U.S. lacks an economic strategy, especially at the federal level. The implicit strategy has been to trust the Federal Reserve to solve our problems through monetary policy... A national economic strategy for the U.S. will require action by business, state and local governments, and the federal government. All three levels have a crucial role to play in restoring competitiveness... Taking leadership in improving U.S. competitiveness is a pressing imperative for business leaders. Many companies have failed to invest enough in improving the business environments in the regions in which they operate...’ This report from the HBS also reiterates some recommendations they made in 2012: ‘/Our] Eight-Point Plan consists of the following policy recommendations: simplify the corporate tax code with lower statutory rates and no loopholes; move to a territorial tax system like all other leading nations’; ease the immigration of highly-skilled individuals; aggressively address distortions and abuses in the international trading system; improve logistics, communications, and energy infrastructure, simplify and streamline regulation, create a sustainable federal budget, including reform of entitlements; and responsibly develop America’s unconventional energy advantage.’ Interestingly, Mr Trump has discussed many of the same points. I personally think that, so far, identity politics has distracted from his HOUSE_OVERSIGHT_026639