Waiting for the "Bidenomics" Breakthrough
Biden presence is very important to create a civilized condition in the global effort to find a new balance point in various post-pandemic problems.
US President-elect Joe Biden and Vice President-elect Kamala Harris deliver remarks in Wilmington, Delaware, on November 7, 2020, after being declared the winners of the presidential election.
Joe Biden\'s journey to the presidency of the United States is not easy at all. The calculation of votes for the US presidential election at present could be the tensest because of the thin difference in the votes. Moreover, his victory does not guarantee the elimination of political divisions between Republicans and Democrats, both in parliament and the wider community. Donald Trump\'s defeat does not necessarily make him walk away from the White House. In reality, Biden is not just competing against the incumbent Trump in the presidential election. More than that, he is battling a political view that since 2016 has received wide support. Even if Trump leaves the White House, not so with Trumpism. It will be entrenched in the US political arena and very likely return in the 2024 elections.
Trump\'s victory in the 2016 presidential election surprised many parties. US voters at that time were fed up with the spirit of globalization, free markets, democracy and US orientation to become the world leader. Trump offered an alternative nationalistic, protectionist, anti-globalization view accompanied by cronyism and racism. A similar boredom was also experienced by voters in many countries.
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The public was shocked by the results of the referendum of the British people who wanted to leave the European Union (Brexit), which was followed by Boris Johnson\'s victory as prime minister. Late last year, the BBC news agency reported an increasing interest among voters in the nationalist parties. In Hungary, Austria and Switzerland, nationalist parties have a vote of more than 25 percent in parliament. Meanwhile, in Denmark, Sweden, Finland, Estonia, Belgium and Italy, they obtained more than 17 percent.
What happened in the political map in the US has become a global phenomenon. Therefore, Biden\'s victory in no way guarantees a decline in Trumpism, both on the US and global political map. This is the real challenge of globalization in the future.
”Bidenomics”
Biden inherits very complex economic problems. The first task is to continue the economic recovery program due to the Covid-19 pandemic. Trump has proposed an economic stimulus package worth an estimated US$3 trillion, which is still in the process of approval by Congress. This program will be used to help small businesses, pay unemployment insurance claims, support local government finances and provide vaccines.
Seeing the results of this presidential election, it is feared that the Senate, which is still controlled by the Republican Party, will not approve the proposal and put Biden in a difficult position. Deadlock events like the Obamacare policy will very likely happen again. As a result, the US economy will be paralyzed because so far it has relied heavily on stimulus packages.
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People celebrate on Black Lives Matter plaza across from the White House in Washington, DC on November 7, 2020, after Joe Biden was declared the winner of the 2020 presidential election. - Democrat Joe Biden has won the White House, US media said November 7, defeating Donald Trump and ending a presidency that convulsed American politics, shocked the world and left the United States more divided than at any time in decades.
There are two main problems being faced by the US economy in the midst of this leadership transition. First, monetary policy has reached its peak, it cannot be played again. Last May, the chairman of the Fed, Jerome Powell, warned that the central bank could no longer help economic recovery by increasing liquidity because interest rates had been approaching zero and the purchase of government bonds had been too burdensome on the central bank\'s balance sheet.
As of March, the Fed was still buying bonds issued by the Finance Ministry for $350 billion per week. However, starting May it has been reduced to only around $50 billion. In fact, the government still needs additional debt issuance of around $3 trillion and the market will not be able to absorb it.
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Second, fiscal policy has been too heavy due to the huge stimulus burden. As a result, the ratio to US gross domestic product has passed 100 percent since the pandemic. Meanwhile, the risk of a second Covid-19 wave will cause US growth to contract again (double-dip).
The US economy in the third quarter of 2020 indeed jumped drastically by 31 percent from minus 33 percent in the second quarter. The growth that is claimed to be the highest in US history is actually false. Apart from the very large stimulus being pumped, high performance occurred because it was calculated from the previous period which was severely corrected.
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Aside from the domestic problems, Biden must work hard to improve the US position in the global arena. First, finding a meeting point for the US-China tensions. In fact, the tensions have occurred since President Obama, especially regarding the alleged theft of US military technology by China. In 2013, when Biden was vice president, there was a high-level meeting between the two countries to discuss cybersecurity. Therefore, even if Biden was able to flex his diplomacy, the main problem would not recede at all, let alone disappear.
Second, restoring the role of the US in the global arena. With a nationalist and anti-globalization spirit, Trump has withdrawn from the Paris Agreement on Climate Change, the nuclear deal, the Trans-Pacific Partnership, and support to WHO. Biden has the burden of restoring the US position as a pioneer of global diplomacy. Apart from the fact that the US efforts to become a global leader have proven insufficient to get internal support, the global map has also changed.
(FILES) In this file photo taken on April 06, 2017 US President Donald Trump (R) welcomes Chinese President Xi Jinping (L) to the Mar-a-Lago estate in West Palm Beach, Florida. - US President Donald Trump said on December 20, 2019 he\'d had a "very good talk" with his Chinese counterpart Xi Jinping on a partial resolution of the countries\' huge trade war.
The Economist (3-9/10/2020) in the heading "Bidenomics" described realistic facts. Biden, who is 77 years old, is not a figure who will be able to change many things. He won the presidential election in the Democratic camp precisely because of his very moderate position. Biden\'s approach to managing the economy is known to be very pragmatic. In terms of competence, Vice President-elect Kamala Harris is even more reliable.
Global influence
Nevertheless, the US presidential election still gets global attention. Many people are looking forward to the new president\'s action because it will have implications in at least two things. First, a map of global trade which will be marked by the improvement of US-China relations and the revival of the role of the World Trade Organization (WTO). The trade war promoted by Trump has damaged world trade and worsened the relevance of the WTO.
Second, the direction of the US economic recovery program, especially the size of the stimulus, will determine global market liquidity and investor expectations in many countries. If the stimulus package is approved, there will be a large injection of liquidity in the US capital market which will flow to financial markets in developing countries. The Indonesian capital market, which is highly dependent on foreign liquidity, will certainly get a positive spillover, even though it is in the short term. At least the exchange rate and the composite stock price index will be greener, thereby providing positive energy for domestic economic recovery.
For us, the impact that is increasingly expected is the long-term effect, particularly in foreign direct investment (FDI) and trade. In 2019, the US was included in the 10 largest countries for direct investment to Indonesia with a value of around $989 million.
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In terms of trade, the US is the largest non-oil and gas export market after China. As of August 2020, the value of our exports to the US reached $11.8 billion, or 12 percent of total exports. Meanwhile, our imports in the same period were valued at $4.9 billion or equivalent to 6 percent of our total imports.
We have a sizeable trade surplus with the US. Therefore, President Trump has included us in the list of countries that are threatened with sanctions for the revocation of export facilities in the form of exemption from import duties (Generalized System of Preferences). It is unlikely that under the Biden administration there will be a significant change in export facilities so that in general there will be a status quo in our trade relations.
People walk past a bank\'s electronic board showing the Hong Kong share index at Hong Kong Stock Exchange Monday, Nov. 9, 2020. Asian shares rose Monday on relief the U.S. presidential election results were finally decided, with Joe Biden the president-elect.
In general, Biden will not make numerous breakthroughs, both in terms of domestic and foreign policies, so that the impact on global trade and the implications for trade relations with Indonesia will not change much. Even so, the Biden government will choose polite diplomacy. Therefore, there are many agreements that are expected to be reached, both related to relations with China and the role of the WTO. Indirectly, of course we will benefit from reaching a global trade consensus.
It must be admitted, the US conflict with China deals with fundamental issues and Biden will not enter into the substance of the problems, such as the acute US trade deficit with China, competition for technological advances and the struggle for geopolitical influence. Even so, we hope that there will be no confrontation that will further widen the differences in interests among countries. The impact of Trumpism on the global political map has been so obvious, and an increasing number of countries share this view. The situation of division is not only experienced by US society, but also has implications for the global map. In this case, the problems created by Trump\'s policies are not easy to fix.
Change of direction
The emergence of Trumpism or nationalist-populist political views is a global phenomenon after the 2008 financial crisis. The crisis and the presence of populism are disruptions in the economic and political fields. Human civilization has also experienced technological disruption that has emerged in Industry 4.0. The Covid-19 pandemic is the culmination of a series of disruptions and is an opportunity for the great reset of global civilization.
The Great Reset Movement was initiated by the World Economic Forum (WEF) through its efforts to create a new consensus on how global civilization is organized, covering economic, political and social governance. Kristalina Georgieva, the executive director of the IMF, said at the launch of the Great Reset that every life lost to Covid-19 is a debt that human civilization must pay through fundamental changes to how we live. In the future, the economy must pay more attention to the environment (greener), be fairer and increasingly adopt technology (smarter).
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In such a situation, the election of Biden as the 46th president of the US will not have much impact on the global constellation. The weakening of US influence in the global constellation must be seen in the context of changing situations that require different responses from each country. This even becomes an opportunity for middle-class countries like Indonesia to be more progressive in appearing on the global scene by offering solutions to overcome Covid-19 while defining the post-pandemic order.
South Korea is recognized as having a great strategy for dealing with Covid-19 through the Green New Deal initiative. Post-World War II, the US together with countries in Europe were the pioneers of the New Deal, which was followed by a large flow of globalization supported by various multilateral institutions such as the World Bank, the IMF and later the WTO. The steps taken by South Korea will certainly not be the same as those of the US and its allies post-WWII, but they can be a model that many countries can replicate in order to create an environmentally friendly economy.
Sung Jong Ha, President Director of Hyundai Motors Indonesia (left) and Makmur, Managing Director of Hyundai Motors Indonesia (HMID) at the virtual launch event of the pure electric car Hyundai Ioniq and Hyundai Kona Electric in Jakarta, Friday (6/11/2020).
Technology can make the economy more inclusive through applications in various sectors.
The South Korean government has launched the Korea Green Growth Trust Fund as an instrument for financing economic reconstruction. The initial stage has launched a $95 billion policy package to finance green investment such as electric cars and hydrogen cars.
Another model that can be adopted by many parties -- government, business world and society -- is technology adoption. The WEF noted that technology-based agriculture (smart farming) had the potential to create 395 jobs and $10 trillion in new business opportunities in 2030.
Technology can make the economy more inclusive through applications in various sectors. In the financial sector, technology has the potential to make access to finance easier and cheaper so that its intermediary function increases. Indonesia has the potential to apply financial technology to increase inclusion and intermediation, especially in 3T (disadvantaged, frontier, outermost) areas.
Covid-19 is not just a health or economic crisis, but also a civilizational crisis that requires the search for new forms of human life, politics and management of economic resources. The global map will also change; China will be the world’s biggest economic power, but will not necessarily replace the US position on the global arena map. It is possible that after this there will emerge new powers that are fragmented in various areas of excellence. Countries in Asia, including Indonesia, need to define unique advantages so that they become models that can be replicated by other countries.
A Prasetyantoko
In short, Biden is not a panacea for the US, let alone the world. His victory will not change many things, at home and abroad. It also seems that there will be no breakthroughs in economic policies. Even so, his presence is very important to create a civilized condition in the global effort to find a new balance point in various post-pandemic problems.
A. Prasetyantoko, Rector of Atma Jaya Catholic University of Indonesia.
