Blame China, not Trump, for the US shut out of Huawei

A robot called "Tappy" which monotonously jabs away at mobile phone screens does not, let's face it, sound like the most sophisticated of technologies.

So it's possible to feel a degree of sympathy with the Chinese firm Huawei which finds itself accused by the US Justice Department of the theft of this supposedly bleeding-edge bit of intellectual property from T-Mobile. The phrase "trumped-up charges" (in every sense) comes to mind.

Yet, of course, there's a bigger picture here than Tappy and Trump. There are questions that go beyond the agenda of the current occupant of the White House and his rabidly sinophobic advisers. Foremost among them is this: are Chinese firms operating in the west a potential security threat? Specifically, should Huawei be shut out of the construction of new 5G infrastructure due to concerns that the company could build "back doors" into its systems that could then be exploited by the Chinese state for espionage purposes?

 In my 2013 book, Chinese Whispers, I suggested that much of the then suspicion of China's commercial influence abroad was over the top. At that time I argued that it was simply not in the commercial or broad economic interests of the Beijing leadership to use western infrastructure assets, or allow them to be used, for nefarious purposes. In some respects that remains true. It's hard to see why there's such anxiety in the west over the Chinese state buying brands like Weetabix, trying to purchase US oil companies or even investing in nuclear power stations.

Why would the Chinese state, which wants to use Bradwell in Essex to provide a proof-of-concept for a new global nuclear reactor technology export business, interfere with the UK's power supply for political reasons? This would, at a stroke blow up its own multibillion dollar investment.

However, one has to accept that the Chinese political leadership has changed profoundly over the past six years. There has been a clear authoritarian turn under Xi Jinping, who has abolished term limits in place since the death of Mao Zedong. Xi has also launched a severe clampdown on domestic dissent, harnessing the full power of online technology to do so.

The new online "social credit system" is somewhat overhyped as a dystopian authoritarian tool, yet it could become one.

Meanwhile there have been countless assertions of party control over nominally private sector firms. Xi came to power promising to let the market take a more "decisive" role; but he has presided over a resurgence of the party-state. The giant Chinese internet and e-commerce companies - Alibaba, Tencent, Baidu, JD. com - have found themselves much more closely regulated.

Once it was just about possible to believe the assurances of Huawei's founder Ren Zhengfei that it had experienced no state influence whatsoever and would not permit it. But no longer. And Xi's conduct is to blame for that.

Alibaba's Jack Ma was "outed" as a member of the Communist Party last year in state media. Members are required to show loyalty to the party above all else. Ma has also announced that he will step down by the end of this year and some informed observers suspect government influence in that decision.

In this context of surging digital authoritarianism and growing private sector subordination it is, sadly, prudent to keep private Chinese firms at arm's length. The UK should follow the lead of the US and prevent Huawei from providing its mobile phone infrastructure.

This is unfortunate for Chinese firms and employees. Huawei is a genuine world leader in its field. And it is precisely the kind of globally competitive technology firm that China needs to prosper if it is to see domestic living standards rise over the coming century.

Perhaps the one, small, positive is that the shut out of Huawei from the west underlines the true nature of China's crisis: that the country's authoritarian leadership is now obstructing the country's economic development.

Why posh white men get more second chances

One of the salient features of Boris Johnson's career is just how many second chances he's been given over the years.

He fabricated a quote when he worked at The Times, a mortal sin for a journalist. He was fired, but rapidly popped up at The Telegraph as if nothing had happened.

As an MP, he later brazenly lied to his party leader over an affair, got fired as a shadow minister, but was later selected as the Conservative candidate for London mayor. As foreign secretary he endangered a British citizen imprisoned in Iran through sheer incompetence. He wasn't fired.

The list goes on and on. Perhaps it's a class thing.

The former Test Match Special cricket commentator Henry Blofeld, an Old Etonian like Johnson, was much loved. But he often made basic mistakes, including misidentifying players.

As my colleague Jonathan Liew pointed out in a memorable article, it's hard to imagine that someone younger, someone without Blower's grand social background, would have lasted so long.

Or is it a gender thing? Charlotte Hogg felt she had to resign last year from a senior role at the Bank of England after failing to follow the code of conduct she had set, as its chief operating officer, for declaring interests, specifically failing to record that her brother worked for Barclays.

By coincidence, around the same time, it emerged that Barclays' chief executive, Jes Staley, had been trying to root out a whistleblower, disregarding the rules of the bank. But Staley wasn't required to resign.

The outcome was a fine, a bonus cancellation and a slap on the wrist from the regulator.

Or perhaps such double standards are a race thing? As Ta-Nehisi Coates has written of Donald Trump: "The mind seizes trying to imagine a black man extolling the virtues of sexual assault on tape, fending off multiple accusations of such assaults, immersed in multiple lawsuits for allegedly fraudulent business dealings, exhorting his followers to violence, and then strolling into the White House."

It certainly feels that some people have more leeway than others; that there's more indulgence when they break the rules; that different standards apply.

A new study by Mark Egan, Gregor Matvos and Amit Seru - which looks at how women working in US financial advisory services are treated relative to men when they break the rules - backs up this intuition.

The researchers found that women face a harsher punishment for similar misconduct. Men also get a second chance in the industry much more than women. The paper's authors call it a "gender punishment gap".

But they found a similar effect for ethnic minority workers. African and Hispanic workers tend to get more severely punished for similar misdemeanours to white financial advisors.

Every large organisation nowadays proclaims its commitment to non-discrimination. Are they lying? Is it cynical public relations flannel? Perhaps in some cases. But not necessarily. The bias may be unconscious.

We've all seen how women can be somehow valued less than men, even when doing the same job.

Superiors seem to have trouble envisioning ethnic minorities as managers, despite their ambition. And when those workers err, they don't get the benefit of the doubt. Interestingly, the researchers found more evidence of double standards in companies with fewer female and ethnic minority managers.

This is one of the reasons ethnic, gender and social class diversity in management is beneficial. It can short circuit the programme of unconscious bias of a management "in-group" when it comes to treatment of staff, whether it's in relation to punishment, pay or promotion.

But this is a tough nut to crack. Like tends to hire and promote like. As most of us probably know, office politics often dominate merit when it comes to elevation. That cements a management's composition and also its biases.

In the end, it's about power. Inequalities of treatment stem from inequalities of power within an organisation. You'll know when an institution is serious about tackling the former when it takes serious steps to rectify the latter.

Turkey's economic crisis is a glimpse into the future of Trump's America

The charismatic president wins elections, but he's also an unabashed authoritarian.

He fires up his predominantly rural and religiously conservative base with populist and divisive rants. He trashes multilateral institutions and insults nations that displease him. He puts his relatives in positions of power. He propagates idiotic economic theories. He complains about interest rate hikes by the independent central bank.

Donald Trump? No, Recep Tayyip Erdogan, the president of Turkey.

Erdogan proclaims that phrases such as "democracy, freedom and rule of law" have "absolutely no value any longer". Trump describes the media as the "enemy of the people" and attacks judicial decisions with which he disagrees. Erdogan has appointed his son-in-law, Berat Albayrak, as finance minister. Trump's 37-year-old son-in-law, Jared Kushner, is his "senior advisor".

Erdogan believes, despite all the evidence in the world, that low interest rates curb inflation, rather than stoking it. Donald Trump thinks, contrary to the view of every credible economist, that the US trade deficit can be eliminated by tariff hikes and trade wars, and that a current account surplus represents some kind of a national economic victory.

Erdogan says the United Nations has "collapsed" and describes the Dutch as "Nazi remnants". Trump labels the World Trade Organisation a "disaster" and talks of "shithole countries" in Africa.

Erdogan describes high interest rates as "the mother and father of all evil" and pledges to "take responsibility" for such issues. Trump says he's "not happy" about the Federal Reserve putting up the cost of borrowing.

The big difference between the two men? That, for Erdogan, the economic reckoning for all this populist destruction has arrived. The Turkish lira is in free fall. After Erdogan's interference with its independence, few trust the central bank to be allowed to do what is necessary to restore calm to foreign exchange markets. The son-in-law finance minister lacks any credibility. This is what happens when you undermine independent institutions, trample over norms of good governance, ignore expert advice and give free rein to nepotism.

Turkey is, of course, in a profoundly different place from the US. The failed coup in 2016 was what accelerated Erdogan's march into autocracy. Opponents of Trump are not locked up, unlike in Turkey.

Journalists are not jailed in the US, unlike in Turkey. Yet things can unravel remarkably quickly.

Just 14 years ago, Turkey's institutions were considered to be of such sufficient quality - with its politics, too, moving rapidly in the right direction - that EU membership was a serious proposition. In 2006 even one Boris Johnson was making the case for its entry into the club. In those days Erdogan took advice from technocrats and experienced, credible political figures such as Ali Babacan and Mehmet Simsek. Few predicted he would morph into today's demagogue.

Now consider the US's trajectory under Trump. Degrading conduct by the president that would have been jaw-dropping from any of his predecessors has become routine. Republicans turn a blind eye to behaviour that would have sent them running to start impeachment proceedings had it come from Barack Obama, or Bill Clinton (or Hillary).

There is a great deal of ruin in a nation, as philosopher and economist Adam Smith once told us. By that, he meant that it's usually premature to announce that a country is finished. Nation states can cope with a great deal of stupidity and corruption from their leaders and folly from their populations.

There's momentum in an economy. Foreign capital continued to sluice into Turkey in great volumes despite Erdogan's authoritarian turn. The US economy is growing at its fastest rate in years, partly thanks to the decent foundation from the Obama years and partly thanks to Trump's unfunded tax cuts.

Unemployment is at its lowest in two decades. The stock market is booming. Yet there comes a point when the ground gives way. And when the breakdown happens, it can happen very fast.

Turkey, under Erdogan, appears to have reached that point. How long will it be before America does the same? To have posed that question only two years ago would have seemed absurd. Alas, thanks to Trump and his enablers in the Republican Party, no longer.

Jeremy Corbyn' nativist dogwhistle

Given the mountains of economic garbage we’ve been served up by both right-wing and left-wing Brexiteers in recent years, the words “benefits” and “Brexit” used in the same sentence inevitably sets off alarm bells.

So it was disconcerting to see them juxtaposed in a Jeremy Corbyn speech. “Our exporters should be able to take proper advantage of the one benefit to them that Brexit has already brought, a more competitive pound,” the Labour leader told industrialists in Birmingham on Tuesday.

“After the EU referendum result, the pound became more competitive and that should have helped our exporters. But they are being sold out by a lack of a Conservative government industrial plan, which has left our economy far too reliant on imports.”

The framing is unfortunate. The reason for the record drop in the pound on the night of the referendum was a rush of expectation across financial markets that the UK economy will be considerably weaker outside the EU’s single market and customs union. There’s no long-term economic benefit implied in the currency slump – only cost.

Yet, in fairness to Corbyn it’s not mad to suggest that a weaker pound should be providing a short-term lift for manufacturing firms. Even the Bank of England has suggested that UK manufacturers have been in something of a “sweet spot”, with sterling weak but Britain still, for now, remaining in the EU’s economic institutions.

More troubling are Corbyn’s comments on imports. “We’ve been told that it’s good, advanced even – for our country to manufacture less and less and instead rely on cheap labour abroad to produce imports, while we focus on the City of London and the finance sector,” he lamented.

There’s nothing wrong with promoting a rebalancing of the UK economy away from its 30-year over-reliance on finance. Yet the implication that the UK would benefit from churning out manufactured products domestically that are currently made in the developing world is nonsense.

New research from the Resolution Foundation this week shows incomes for the worst off in Britain are no higher than they were 15 years ago. A major part of the reason is that low-skilled men have seen their weekly hours collapse. Reshoring low-value manufacturing will not help such people. Nor will it restore depressed communities to economic health. That is the kind of con artist’s fantasy that Donald Trump has been spinning to US steel workers in the American rust belt.

The only sensible and feasible vision for the future of UK manufacturing is a high value added one, using skilled workers, cutting-edge equipment and, if necessary, foreign investment and expertise.

Corbyn’s reference to “cheap labour abroad” smacks of the beguiling creed of economic nationalism. His remarks may not be explicitly anti-foreigner but they are still resonant of Trump-style tirades against corporate outsourcing.

And, in this context, his talk of keeping government contracts in the UK, rather than allowing foreign firms to bid for them, was also disturbing.

Yes, all nations already do this to some extent. But one has to be extremely careful about turning it into a general principle of government. For if you shut others out of your market, they will, inevitably, shut you out of theirs.

Corbyn joined the Daily Mail, of all publications, in complaining about the fact that the contract to manufacture new British passports has been awarded to a French firm, rather than Gateshead’s De La Rue.

But De La Rue does printing jobs for many foreign governments. Make no mistake, if all contracts were awarded on nationality grounds British firms – and British workers – would ultimately suffer more than they would gain.

In truth, the overall tone of Corbyn’s speech was more than a little alarming. The protection that UK workers need is from destabilising globalisation of “hot money” capital flows and undercapitalised multinational banks, not the globalisation of manufacturers’ supply chains.

They need protections from macroeconomic mismanagement in the form of self-defeating austerity, not from “cheap labour abroad”.

The problems of the British economy stem from under-investment, deficient training, short-termist bosses and shareholders, unbalanced regional development, an official blind eye turned to inflows of dirty money, and poor macroeconomic management – and Corbyn was justified in raging against all of these. But he was quite wrong to blame the UK’s general policy of economic openness.

At best this speech was an unwelcome distraction from the dominant challenge of protecting UK jobs in the face of the catastrophe of a “no deal” Brexit and the long-term pain of a hard one. At worst it was a cynical dog whistle aimed at already grievously misled Leave voters – and the dipping of Labour’s toe into some very dangerous waters.

The new US car factory exposing the contradictions and perils of Trump’s trade war

"Yeah, it was all pretty much just woods around here," says a Berkeley County police officer. Then Volvo came.

The Swedish-Chinese car manufacturer last Wednesday officially opened a new assembly plant near Ridgeville, some 30 miles north of Charleston, South Carolina.

With some help from the state government, a 6,800 acre space in the tall pine forest in Berkeley County was cleared and the shiny new factory was erected.

The plant, Volvo's first manufacturing facility in the US, has created around 900 jobs so far, many of them for locals. The number of employees is due to rise to around 1,500 by the end of the year as it ramps up production of the S60 sedan; and then possibly to 4,000 if, as hoped, Volvo starts manufacturing its popular XC90 SUV there too.

The estimated $ 1.1bn (£ 831m) investment constitutes a major economic boost for the rural community of Ridgeville - and also for the state, which already boasts a major BMW assembly plant further north in Spartanburg.

"The south will one day be the ground zero for US auto manufacturing," predicts Kevin Graham, the Volvo plant's director of assembly, in a cheeky warning to the "motor city" of Detroit.

Yet Ridgeville could also be ground zero for collateral damage from Donald Trump's kamikaze trade war.

The US president fired up Twitter last Friday by going public with a new threat to impose 20 per cent tariffs on European Union cars and car part imports to the US.

Volvo imports around half of its parts for Ridgeville, including engines from Sweden and batteries from China. A 20 per cent tariff would inflict serious economic damage on the new Ridgeville plant.

But that's not all. Volvo intends to export around half of the cars it manufactures in South Carolina. If the EU or China hike tariffs in response to Trump's, this European-Chinese company could get doubly walloped.

"Good thing they built it before the threats, because they may not have come otherwise" says Frank Hefner, an economist at the College of Charleston.

Volvo's CEO Hakan Samuelsson tried to be upbeat at the factory's inauguration last week, saying he was hopeful that sense would prevail in the trade dispute and citing Trump's leftfield suggestion at the recent G7 meeting in Canada that he would ultimately be in favour of eliminating all tariffs.

Yet the underlying message from Samuelsson and his team was clear. New tariffs on auto imports could well mean the full planned investment in Ridgeville not proceeding - and that this would be bad news for jobs in places like South Carolina.

"If we go back to the 19th century when everyone wanted to protect their own market, that is definitely not good for the wealth of nations. That would really be bad - not just for Volvo," Samuelsson told The Independent. The Swedish ambassador to the US, Karin Olofsdotter, who was also at the launch, was even more direct.

"We are extremely worried when it comes to possible car tariffs - a plant like this does not need that. We are all part of global value chains and that's what creates the jobs we have today and that's how the economy works," she said.

And, looking in the direction Nikki Haley, the former South Carolina governor who has been appointed as Donald Trump's UN ambassador, who was sitting on the front row, Olofsdotter implored: "Those of you who have possibly a little influence, I really hope you can bring this message forward." Two days later Trump took to Twitter to threaten the EU with auto tariffs.

Buy American Volvos?

One of Donald Trump's preferred slogans is "America First", and he has urged households to "buy American and hire American". Hardly auspicious sentiments for a foreign car company like Volvo.

But Claire Gibbons, director of global marketing and communications at the Charleston Regional Development Alliance (CRDA), says there need be no contradiction.

"Is it less American when they're made in America, and they employ hundreds and thousands of Americans?" she asks. "BMW has been in upstate South Carolina for 30 years. We live in a global economy and I would be proud to buy a car made in my community by neighbours. The fact that it may be owned by somebody in Sweden or China is irrelevant to me."

Davd Ginn, the CRDA's director, also insists that buying Volvo can be a patriotic choice, even in Trump's America. "When Volvo announced they were going to add the XC90 to their line here, my wife and I went out and bought one. As I host guests here, they say 'this is a nice car' and I will be able to respond in about two years' time that 'it is made in Charleston'."

Volvo was bought from Ford by Hangzhou's Geely group, controlled by the tycoon Li Shufu, in 2010.

"We were in pretty rough shape," admits Lex Kerssemakers, Volvo's chief of Europe, Middle East and Africa. "We were making fewer than 400,000 cars, Ford had said we couldn't use their engines and platforms because they wanted to cut all connections with us, our models were getting old. [Geely] brought a sense of entrepreneurship. We launched new factories, new cars on new platforms, decided to go for electrified cars. Nobody ever does so many things together in the automotive industry, it's just too dangerous. We had no choice and Geely trusted us."

But though Volvo executives are willing to acknowledge their debt, others seem less keen to publicise the Chinese connection. Henry McMaster succeeded Ms Haley as South Carolina's governor last year and was the first statewide elected official to endorse Trump in 2016.

Speaking at the Volvo factory launch, he declared that "the combination of Sweden and America and South Carolina is as strong as it gets". There was no mention of China, the country that President Trump regularly accuses of "raping" the US on trade and purloining American corporate intellectual property.

On Monday Trump appeared at a rally in support of Governor McMaster, who is facing a tough primary run-off election challenge.

Pineapple town

Pineapples are everywhere in Charleston, or at least carvings of them are. They represent Charleston's trading history. In the era when the Carolinas were British colonies, sailors brought them back from their voyages and skewered the tropical fruit on fence posts to signify to neighbours that they had returned safely.

A statue of a giant pineapple squats in a fountain in the city's waterfront park. Last week, it was full of children trying to keep cool in the 35C heat and 80 per cent humidity.

In the shadow of the fountain, three Charleston municipal gardeners were taking a well-earned break from trimming the palm trees. They knew about the new Volvo plant - everyone in Charleston seemingly does.

But not the threat posed to it by Trump's tariffs.

"I've seen the [trade story] on the news, but tariffs won't affect this plant if the cars all made here will it?" one asked. They were all also surprised to learn Volvo is Chinese owned.

South Carolina, like almost all the southern states, voted overwhelmingly Republican in the 2016 presidential election.

"This is a state where if you're a walking Republican you will get the election. Now you can be a walking Republican but if you're not a Trump supporter, we're not too sure what's going to happen to you," says Professor Hefner of Charleston College.

So how do people feel when a major new local employer says the president's trade policy is dangerous? Workers at the Volvo plant clam up when talk of tariffs comes up. "That's part of politics that we don't engage in," says Mr Graham, the director of assembly.

Claire Gibbons of the CRDA explains that people tend to focus on their jobs, rather than the news. "The global implications don't necessarily trickle down immediately. Once the negotiations [on trade] happen and things are put in place, then you start to see the ramifications and the cost implications. It's too soon to know [at the moment]".

Charleston is certainly not some hollowed-out ex-steel town. And across South Carolina one does not see the "rusted-out factories scattered like tombstones across the landscape of our nation" referred to by Trump in his almost apocalyptic inaugural address last year.

"For Charleston things are booming and for South Carolina things are going well," says Professor Hefner.

The state's unemployment rate is 4 per cent, barely higher with the national average of 3.8 per cent.

Hefner says locals are not suffering economically but they still buy the zero-sum Trump logic on trade.

"The typical reason that people would vote for Trump would be non-economic issues - immigration, abortion, conservative lifestyle kinds of things," he says. "They like his conservatives views on social issues and they swallow the views on trade hook, line and sinker. But it's not because they're afraid for their jobs but because they think what he's saying is right! It seems logical."

Lessons from history

The word is that Trump himself was invited to the launch of the new Volvo factory. And why not? On one level, its existence ticks the major boxes of the Trump economic doctrine.

It is a new factory on US soil, creating new jobs. And old-fashioned manufacturing jobs at that. The decision by Volvo to invest in Ridgeville was taken before Trump launched his White House run, but that need not have stopped him at least trying to take credit.

Yet all the evidence suggests the president's tariffs would be as welcome as a slug of petroleum in a dish of traditional Charleston she-crab soup to Volvo's global operations and to Ridgeville in particular. They might well end up destroying some of the jobs in the state that have been created, or cancelling those that have been promised.

Volvo in South Carolina is a microcosm of the US economy’s vulnerability to an automotive trade war that fractures global supply chains and discourages foreign investment.

US tariffs could conceivably encourage Volvo to source more parts in the US, which is presumably what the Trump team would want. But that would not help the company if wants to export its vehicles in the midst of a global trade war. The more likely result is less US investment, not more.

EU-owned car companies  - firms including BMW, Renault, Volkswagen - account for more than a quarter of US car production, supporting an estimated 120,000 jobs. As well as in South Carolina, there are production facilities in Alabama, Mississippi and Tennessee - all Republican states.

Recent work by the Peterson Institute for International Economics, a respected Washington think tank, estimates Trump's auto tariffs could cause 195,000 US workers to lose their jobs in total over three years and that this cost could rise to 624,000 if other countries retaliate.

The plight of Volvo also demonstrates some wider ironies and contradictions of Trumpism.

Volvo was a dying brand under the ownership of the all-American auto giant Ford. It was rescued by Chinese ownership. With no Geely rescue there would have been no Volvo investment in the US. With no Volvo investment there would have been no new jobs for Trump voters in this part of rural South Carolina

Frank Hefner says South Carolina's own history demonstrates why trade barriers will only end up harming those they are supposed to protect.

"When I first moved here in 1988 the general sentiment was [concern] over textiles and apparel manufacture moving offshore. The buzzword then was to keep textiles in the state," he recalls.

"Looking backward 30 years you'd have to say thank goodness we didn't have trade barriers that stopped international trade to protect an old, outdated industry."

The global implications don't necessarily trickle down immediately. Once the negotiations on trade happen and things are put in place, then you start to see the ramifications and the cost implications

Protectionism: The lessons of history

It's 1929 and two Republican politicians, Reed Smoot of Utah and Willis Hawley of Oregon, are cosponsoring legislation to keep foreign goods out of the United States. This act of protectionism, the pair promise, will boost domestic employment and protect the living standards of the ordinary American working man.

The Smoot-Hawley Tariff is met with a thunderous wave of condemnation from the economics profession.

More than a thousand academics and practitioners petition President Herbert Hoover to veto the legislation.

But to no avail. Hoover, who campaigned on a protectionist ticket, signs the bill into law and import levies on some 20,000 items are jacked up to an average of 40 per cent. America's great industrial tariff wall goes up - and it will not fall again until after the smoke and chaos of the Second World War clears some 15 years later.

Who says history doesn't repeat itself? Skip forward 88 years and Donald Trump is being sworn in as US president in front of the same Congress building that witnessed the passage of Smoot-Hawley. "Protection will bring great prosperity," the real estate tycoon and reality TV star declares before the relatively meagre crowd on the National Mall.

Economist jaws, once again, fall in horror. A poll earlier this year shows that virtually everyone in the profession believes tariffs will be damaging rather than beneficial for the US economy. It's a conviction that spans the political spectrum. Economists who virulently disagree about over deficits, tax cuts and regulation find themselves united on this single point about the merits of free trade. But, once again, the academic consensus does no good. The massed ranks of pointy-heads are disregarded. Trump's bite is matching his bark.

First he went after China, hitting imports of robots and high-speed trains. Then, last week, he crossed a fateful threshold. The Trump administration imposed 25 per cent levies on steel from Europe, Canada and Mexico. And, in what felt like a grave insult to these historic US allies, this was justified on "national security" grounds.

Nor is this the end. Next in Trump's sites are imports of foreign cars. And after that - who knows? Meanwhile, Europe and Canada, knowing that a man like Trump will mistake patience for weakness, are already hitting back with countervailing tariffs against American goods, from blue jeans to bourbon.

Beijing seems to be halting its massive purchases of American soybeans, striking at the agricultural heartland of Trump support. And so the 1930s cycle of retaliation, economic pain, popular anger and evaporating trust seems to emerge from the darkness, like the ghost of trade wars past.

The US will cut an isolated, even reviled, presence at the G7 meeting of the leaders of top economies in Quebec this weekend. Some even question whether the multilateral framework governing global trade can survive a lurch into naked protectionism from the world's largest economy and the post-war driving force behind liberalisation and openness.

Comparatively speaking

Ever since a British thinker and politician called David Ricardo outlined a revolutionary idea of "comparative advantage" in 1817, using an example of Portuguese wine and English cloth, economists have been convinced of the theoretical merits of free trade.

Ricardo argued that productive efficiency in every nation is maximised when people focus on producing what they are best at producing and exchange the results. The intellectual revolution lay in the word "comparative". Ricardo demonstrated that any given country could drive up its prosperity, not necessarily by being a world beater in any particular category of export, but simply by focusing on its resources on what it could produce most efficiently (whether because of the natural fertility of its land, or its abundant supplies of cheap labour or its technological resources).

The theoretical implication was that every nation could benefit from trade. Ricardo thus demolished the credibility of rival theories of "autarky", the idea that a nation should consume only what it can itself produce, and "mercantilism", the theory that one nation's export represents another nation's economic loss.

Economic historians have tended to present a united front on free trade's merits in practice too. They disagree over how much economic damage Smoot-Hawley actually did on top of the monetary and fiscal policymaking blunders of the Great Depression of the early 1930s, but virtually none argue that protectionism and tariffs made things any better.

And, for the period since the Second World War, views are even more categorical. It's widely agreed that the US Marshall Plan, which lent generously to the bombed-out economies of Europe and dismantled trade barriers, helped to lay the foundation for Germany's Wirtschaftswunder (economic miracle) and France's Trente Glorieuses (30 glorious years). China's assimilation into the global economy after the death of Mao Zedong in the late 1970s, and its emergence as a global export powerhouse, has helped to yank hundreds of millions of Chinese out of destitution.

"The world trading system has been fundamental to the post-war success of the world economy which has seen large increases in incomes and, for the first time in history, an absolute fall in world poverty," states L Alan Winters of Sussex University, neatly encapsulating the contemporary consensus of the profession.

Leaning by doing

Yet there are wrinkles in this story of all-conquering trade liberalisation as a driver of prosperity. Not everything fits neatly into the parable of comparative advantage. During their rapid industrialisation phases of the second half of the 19th century, countries such as Germany and the United States erected lofty tariff walls to protect their domestic manufacturers from intense competition from the industrial superpower of the day, Great Britain.

The Cambridge economist Ha-Joon Chang notes that most of today's rich countries actually "practised significant degrees of protectionism for substantial periods" during the 19th and 20th centuries. Free trade advocates can say things might have been even better for these states, but there is little reason to conclude that protectionism held back Bismarck's Germany or Ulysses Grant's United States, at least to any significant extent.

And there are examples from the post-war era too. South Korea's industrial takeoff in the 1960s happened behind high tariff walls. Japan protected its nascent domestic car industry from foreign competition for 40 years after the Second World War. It was a similar story in Taiwan. Again, there is little evidence that protectionism did major damage to these states; their growth rates were some of the highest in human history.

Indeed, a combination of trade barriers and industrial subsidies actually seemed to help these Asian nations reach their economic potential. Protecting industries like steel manufacturing and shipbuilding, this argument goes, builds industrial capacity, which can then be the basis for other higher-value added technological development. Protectionism enables "learning by doing" for domestic managers and the bureaucrats who set policy - opportunities that would not be available in a world of totally open trade.

As Ha-Joon Chang points out, South Korea's apparent "comparative advantage" back in in the 1950s was in fishing and low-grade wig-making, not shipbuilding or consumer electronics. If South Korea had merely stuck to what it was good at 60 years ago and waited, would we today have Samsung? Would we have Toyota? Or Taiwan's Acer? Many are sceptical of any general applicability of such lessons for poor countries. And there are plenty of countervailing examples of developing states where protectionism has resulted in waste and corruption.

Yet there is a powerful weight of historical evidence that a degree of protectionism can, under certain conditions and alongside certain other policies such as export promotion, play a positive role in development.

Breaking bargains

That is not the only wrinkle. We are not merely economic animals. The Harvard economist Dani Rodrik argues that it's important to think about social fairness when it comes to trade, not just pure Ricardian efficiency effects.

Overproduction of steel in China, dumped in world markets at prices below the true cost of production for the past decade, might have meant cheaper inputs for Western manufacturing firms and thus more productive industry, extra aggregate jobs and higher incomes in rich countries. But when it undermines intangible but crucial "social bargains" between a Western government and its domestic steel workers, who risk losing their jobs because of cheap steel dumping, people quite reasonably feel aggrieved.

Similarly, if corporate offshoring occurs not because production is more efficient overseas but because companies take advantage of laxer health and safety regulations, that too can represent a breach of the broader public's sense of fairness.

It was this sense of a broken social contract that Trump's "American carnage" inaugural address touched on when he raged that "one by one, the factories shuttered and left our shores, with not even a thought about the millions upon millions of American workers left behind".

The wrong lessons

So are these wrinkles enough to salvage some respectability for Trump's protectionist crusade? Alas, no.

America is on the technological frontier. Those "learning by doing" development effects are hardly relevant for the most productive economy in the world.

The social bargain argument does make a strong case for facing up to and tackling Chinese overproduction and other forms of industrial dumping - more than many economists and politicians accept. And this blind spot among the policymaking establishment is probably one of the reasons why populists like Trump have won an audience.

Yet the fact remains that tackling this evil can only be done sustainably through multilateral organisations like the World Trade Organisation. A free for all threatens the whole system, at huge potential economic cost.

Moreover, Trump's anger over trade extends far beyond unfair dumping. He and his advisers want to keep out imports in general, under the primitive mercantilist believe that the raw size of the US's goods trade deficit represents a measure of the extent to which America is being taken advantage of by swindling foreigners. Ricardo must be turning in his grave.

Back in 1929, the industrialist Henry Ford was one of those who pleaded with President Hoover not to impose Smoot-Hawley. But, when it comes to trade, the current White House incumbent seems to have absorbed a separate and simpler view expressed by Ford many years earlier: "History is bunk."

You can have Wall Street and Donald Trump after all

Last week another banker had his collar felt. Goldman Sachs employee Woojae Jung was arrested and charged in the US with insider trading. Jung is accused of using confidential information on planned corporate merger activity, gathered from within Goldman's investment banking department, to make secret trades in the companies involved. Jung, allegedly, knew which way the market was going to move when the information became public and personally positioned himself to profit from that.

Just another unremarkable tale of alleged corruption on Wall Street? Perhaps the significance is greater than that. For, by coincidence, last week also saw the Federal Reserve, America's lead financial sector regulator, propose to water down the "Volcker Rule", a centrepiece of the legislation enacted by the US in the wake of the global financial crisis a decade ago. The Fed, led by recent Trump appointee Jerome Powell, is giving the banking lobby what it has been hollering for ever since the rule was devised by the Barack Obama administration back in 2010.

What does the Volcker Rule, named after the former Federal Reserve chair Paul Volcker who designed it, do? It prevents Wall Street banks, such as Goldman, from "proprietary trading", that is to say directly making bets on the movement of financial markets using their own money. This might sound a bit odd to many people. Because isn't this precisely what these financial institutions do to generate their profits and bonuses? The answer is no, at least in theory. These banks' traders are supposed to facilitate foreign exchange and bond buying orders etc on behalf of their corporate clients.

While they can legitimately make a profit from such market making - pocketing the difference between what they buy the various assets for and what they sell them for - they are not supposed to nakedly speculate for their own institution's profit. There's inevitably a grey area here: one traders' speculation is another's simple pre-emptive buying of assets to facilitate an expected future client transaction. Yet what Volcker did was to shrink the grey area considerably and make the speculation element considerably more onerous and expensive.

And rightly so given the catastrophic hidden risks banks turned out to have been running in the years before the financial crisis. Rightly, too, given the fact that these banks still benefit from a de facto taxpayer guarantee. There's no case for publicly subsidised gambling - certainly not for underwriting gamblers with trillion dollar balance sheets.

The Jung allegations remind us why this functional separation is not only appropriate for banks but ethically necessary too. Wall Street banks have a hugely privileged position in the flow of financial information. Their investment banking divisions find out early about possible market moving mergers.

Their share dealing and asset management divisions register big buy or sell order from clients which are likely to move markets simply due to their size. The opportunities for banks to profit from such information are vast. It's a testament to the degree to which banks like Goldman effectively wrote their own rules before the global financial crisis that regulators sat back and allowed them to gamble in such patently conflicted ways, even to the extent of having in-house highly-leveraged hedge funds.

This is not just a tale of American folly. Where Wall Street treads in financial markets, history shows us that the City of London ultimately tends to rush in too

The primary argument of the banking lobbyists is that the Volcker rule now constrains "liquidity" in financial markets, specifically because it limits banks' ability to take positions in the assets they trade. But the benefits of liquidity in financial markets for the wider economy are grossly exaggerated. Ordinary people do not turnover their pension share portfolios multiple times a day. Even large multinational corporations, which do need to buy and sell currencies and hedge themselves against rising interest rates regularly, really do not require the kind of hyper-liquidity that the banks are talking about.

As Denis Kelleher, the head of the Better Markets pressure group in Washington, puts it: "There is no evidence that the Volcker Rule has had any negative effect on financial activities related to the real economy."

The real beneficiaries of hyper-liquidity in financial markets are speculators. And, of course, dealers, such as the large banks. The watering-down of Volcker is not about benefiting the US economy, but further boosting the profits of the large banks and the bonuses of their employees. And as we saw happen with the tight financial regulations that prevailed after the Second World War, such as the strict separation of investment and retail banking, Wall Street tends to play a long game of suffocation: breach the spirit of the law and then hollow it out gradually until there's nothing left.

This is not just a tale of American folly. Where Wall Street treads in financial markets, history shows us that the City of London ultimately tends to rush in too.

Trump, readers might remember, campaigned as a champion of Main Street, accusing Wall Street of "getting away with murder". He pilloried his opponent Hillary Clinton for once making a speech to Goldman for which she received $225,000. So effective was this anti-finance shtick that the whistleblower Edward Snowden even tweeted in February 2016 that the presidential election represented a dismal "choice between Donald Trump and Goldman Sachs".

As the assault on the Volcker Rule confirms, this was one of the worst pieces of analysis of recent history.

You can indeed have the nightmare combination of Donald Trump and Wall Street - and America is now getting it good and hard.

The hidden fees "drip-off"

Donald Trump versus Simon Calder. There was only ever likely to be one winner.

Thanks to The Independent's indefatigable travel correspondent the £ 20 "resort fee" that Trump's Scottish golf course, Turnberry, had attempted to impose on its guests has been pretty swiftly removed by its managers.

Simon's hand was doubtless strengthened by the fact that such concealed-but-compulsory charges for things like wi-fi, swimming pool access, in-room coffee machines etc are actually illegal here in the UK.

And long may it remain so. This is one kind of American import against which we should resist as vigorously as Trump himself seeks to repel Chinese steel and Mexican-made cars.

A report commissioned by the outgoing Obama administration in 2016 notes that such sneaky fees in the American hospitality industry extorted more than $2bn (£1.4bn) out of Americans in 2015. Despite only being introduced in the late 1990s such fees have metastasised and now make up almost a fifth of the revenues of US hotels.

But before we get self-congratulatory about our enlightened proscription of resort fees, we might remember that considerable tranches of our own markets are also, and apparently quite legally, distorted by what's sometimes known as "drip pricing". 

On my way to Darlington from London on Virgin's East Coast mainline last week I logged on to the train's "free" wi-fi to discover that it was only complimentary for those who had booked their ticket directly through Virgin's website, something I suspect very few of their customers actually do. So to get online for a couple of hours I had to fork out £ 5.

There are plenty of other examples of sharp selling. Those who hire a car at a UK airport will still often find all manner of unexpected compulsory additions wrung out of them upon arrival, such as insurance and refuelling. And of course there are those notorious excess baggage charges from airlines.

The tricks can be subtle too. An entire industry exists to create "strategic choice architecture" to exploit our psychological frailties over pricing. Sales assistants are trained to "upsell", flogging everything from pointless insurance for small household electronics to extra fries with your hamburger. 

And have you noticed how clothing retailers' seasonal "sales" now actually tend to cover most of the year? And why are printers so cheap, yet the replacement cartridges so expensive? 

Is it something to worry about though? Doesn't it all even out in the end, as we get wise to the scams and tricks over time? Doesn't the free market work its magic? 

Possibly not. The White House report into drip pricing concluded that such charges aren't just an irritation, but do wider economic damage by interfering with the price signals that free markets need to function efficiently.

If you think a room is on sale at $80 you might consider it decent value and book it. But if you'd known the real price was actually $110 you might not have. Or perhaps you might have booked a different hotel with an all-in fee of $90. Yet if that $90 hotel had needed to compete with the headline prices offered by a dishonest one, it too might have had to conceal it's own true room price, adopting a spurious resort fee of its own. And so on and so on. It's easy to see how a market can quite soon become corrupted.

The rise of price comparison websites seems to have accelerated this race to the bottom on tariff opacity in some markets. As we do an increasing amount of our shopping and purchases online, this problem will likely grow. When people are making a decision on a one-off purchase remotely, based on headline quoted price, they are inherently vulnerable to exploitation.

Vendors should put their houses in order and ensure genuine price transparency. If they will not - or cannot - more will be expected of regulators. And the longer the "drip-off" continues, the heavier the hand of that intervention is liable to be.

On trade, Trump and the Brexiteers are not as far apart as you might expect

When it comes to trade, liberal Brexiteers are cut from a very different cloth from Donald Trump. Or so we're led to believe.

Trump wants protection. But Brexiteers want more trade, even unilateral tariff cancellations on imports to the UK.

Trump has a pinched and paranoid vision of "America First". Yet Brexiteers nourish an expansive and open-minded dream of "Global Britain" signing major new deals with emerging market superpowers.

Trump is in the mould of his late 19th century predecessor, William McKinley, who proclaimed: "Protection is but the law of nature, the law of self-preservation, of self-development." Brexiteers such as Liam Fox, Boris Johnson and Michael Gove, by contrast, walk in the enlightened footsteps of John Bright, Richard Cobden and the Anti-Corn Law League.

But are Trump and the liberal Brexiteers as different as that rhetorical divergence suggest? As he unveiled his new tariffs on steel and aluminium last week, Trump articulated his philosophy on trade to Twitter.

"When a country is losing many billions of dollars on trade with virtually every country it does business with trade wars are good, and easy to win," he explained. "Example, when we are down $100bn with a certain country and they get cute, don't trade anymore - we win big. It's easy."

One can hear an echo of that "we can't possibly lose" perspective in the Brexiteers' misplaced confidence that, because the European Union has a trade in goods surplus with the UK, the Europeans will ultimately be desperate to sign a post-Brexit free trade deal.

"Within minutes of a vote for Brexit the CEOs of Mercedes, BMW, VW and Audi will be knocking down Chancellor Merkel's door demanding that there be no barriers to German access to the British market," the now Brexit Secretary, David Davis, famously predicted before the referendum.

What both the Brexiteers and Trump fail to understand is the nature of trade deficits. Trump is deluded to believe, as he clearly does, that a bilateral trade deficit is evidence of a country "losing" in trade and a surplus, correspondingly, evidence of "winning".

And the Brexiteers are deluded, albeit in a slightly different way, to believe we are, like a customer in a charity shop, somehow doing EU companies a favour in buying their exports - and that we could simply stop doing so without inflicting any harm on ourselves.

But, even accepting all that, Brexiteers would never advocate crude Trump-like tariffs, would they? Perhaps not. Yet leaving the EU single market and customs union are, nevertheless, inherently trade destroying policies for Britain; perhaps the most destructive since the Second World War.

No credible study has found any grounds for believing that hypothetical future trade deals between the UK and the likes of China and Australia could, arithmetically, compensate for leaving the EU's free trade institutions (which, let us remember, the Thatcher government helped to shape).

It's also worth delving a little more into the Trump position. On Twitter he embraces bellicose talk of a trade war. But speaking in Davos in January, the tone from Trump and his economic team was rather different. All they wanted, they said up in the Swiss Alps, was "fair trade", reform of a system "rigged" against America.

"The US is prepared to negotiate mutually beneficial bilateral trade agreements with all countries," Trump told delegates of the World Economic Forum.

This might get us closer to the underlying substance of the Trump position. What we have is a visceral rejection of multilateralism, or working in concert with other nations, as an equal, to achieve a mutually beneficial end. America will only negotiate with other countries one on one. For Trump, trade is really about power. It's an ideological view on the appropriate nature of international relations.

One of the most pointlessly destructive elements of Brexit when it comes to trade is that the UK will automatically fall out of the coverage of the 50 or so trade deals signed between the EU and a host of other countries, ranging from South Korea and Mexico to Chile and South Africa.

We will have to scramble to recreate those deals after 2019 merely to avoid damage to our own exporters who have come to rely on them. The net economic benefit of this upheaval is quite elusive.

Moreover, we might ask, what is the objection, if the Brexiteers feel the EU has not been proactive enough in seeking to strike new trade deals with emerging markets, to remaining in the bloc and pushing for change from within, working with similarly pro-free trade allies such as the Netherlands and Sweden?

The obvious answer is that liberal Brexiteers, like Trump, harbour a temperamental hostility to the very principle of multilateralism, even if it delivers the ends they purport to want. It's a hostility that overrides any rational cost-benefit judgement.

Working through the EU to enhance the export opportunities of our firms and reduce import costs for consumers would not enable these political narcissists to feel, on a personal level, that they had taken back control.

Despite their rhetoric, for liberal Brexiteers, leaving the EU is less about new trade opportunities, than power. And, as with Trump, the power in question is not really their country's but their own.

INTERVIEW: Paul Krugman

As you would expect, Paul Krugman, the Nobel laureate economist and possibly America’s most influential liberal commentator, gets inundated with emails from the general public.

But one seems to have lodged in his mind. It came in August after Krugman had savaged Donald Trump for pardoning the notorious immigrant-brutalising Nevada sheriff, Joe Arpaio. In his regular New York Times column Krugman claimed that Trump’s pardon amounted to an endorsement of American-style fascism.

An email from a correspondent shot back: “It’s all very well for you to criticise Arpaio but how would you feel if New York was full of immigrants?”

Krugman, who won the Nobel Prize in Economics in 2008 for his work on trade, chuckles as he recalls the message, amused at this vision of the Big Apple as some kind of whites-only, immigrant-free, heartland town. Isn’t it supposed to be the coastal liberal elite who are out of touch?

Multicultural New York is Krugman’s home now. His academic berth is the City University of New York (CUNY), having moved from nearby Princeton in 2015.

He writes for The New York Times, although his superhuman blogging output has slowed down a bit in recent years. Krugman, 64, now spends more time with his 3.5 million Twitter followers. My news editor informs me the Independent’s web traffic notably spikes whenever he retweets one of our articles.

Krugman, who is married to the African-American economist Robin Wells, has made it clear he regards Trump as a white supremacist and an existential threat to the future of the American republic.

So when we meet on a grey September day in London’s docklands, at a conference looking back at the financial crisis 10 years on, organised by the Centre for Economic Policy Research, I’m interested to know how Krugman copes with what, by his own description, is a national emergency? Does it feel like he’s involved in a kind of war for the very survival of US democracy? Does he wake up and put a metaphorical tin helmet on?

“It doesn’t affect my daily life. I belong to a class of people who don’t get beaten up by the police,” he says, referring to the upsurge in protests against US police brutality and shootings.

“The closest I’ve got is that CUNY has a lot of students, including a fair number who were affected by the [Trump] Muslim ban – so I get all of that as part of the community, trying to defend these people’s rights.”

Speaking of university communities, one of the arguments deployed by the demagogues of US talk radio is that Trump’s rise represents a popular backlash against so-called campus illiberalism: the phenomenon of left-wing students at American education institutions, like CUNY, protesting against speaking invitations extended to right-wingers and demanding politically correct ‘safe spaces’.

Krugman doesn’t buy it. “On the one hand it’s stupid to play into right-wing caricatures of who you are. On the other hand the idea that that’s responsible for [Trump] is crazy,” he says. “The overwhelming example of identity politics in America is white Christian identity politics – that’s far more important.”

Krugman’s name is anathema in the land of the intellectual right, where he is regarded as unspeakably arrogant for his “shrill” denunciations of their economic error.

Yet arrogance isn’t the impression he conveys when we meet. In fact there’s a definite note of humility in his voice when I remind him of his predictions five years ago that Greece would leave the eurozone. Greece is still there. And now activity in the single currency is picking up.

“The political durability of the euro has been greater than I understood,” he admits. “Why is Greece still in the euro? It’s fundamentally because the Greek elite wants to be part of it – they fear being an outcast. They are willing to put up with almost anything to stay in. That’s been a surprise.”

Yet the trenchantly Keynesian author of End this Depression Now! has certainly not changed his mind over the damaging impact of austerity in the Western world over the past seven years.

And that goes for the UK, where Krugman was a major critic of the coalition government’s 2010 cuts. “In the end there was quite a lot less of it than the rhetoric would have suggested but it was certainly a bad thing,” he says. “UK performance over the [former Chancellor George] Osborne years is nothing to write home about. There is nothing that vindicates the policy.”

But humility returns when he discusses the puzzle of why, both in the US and the UK, average wages are not rising strongly despite the fact the unemployment rate in both countries has fallen to pre-crisis levels. Weak wages and inflation at a time of low unemployment is something that contradicts the fundamental model that has been used by macroeconomists for decades.

“Something has gone very wrong,” he concedes. “I’m not sure what the answer is. In effect everything we’ve done in macroeconomics since the 1970s is looking like it was wrong!” he says.

Krugman is fond of noting that “no one ever admits they’re wrong about anything”. Yet he’s not finding it too much of a struggle. In fact he seems remarkably relaxed about the possibility of error. But that might be because he’s just spent the past five days walking in the Cotswolds. “I’ve been before but not for a long time,” he says. “It was perfect!”

A brief holiday before flying back to the Big Apple to rejoin the battle to save American democracy.

This article appeared in The Independent on 19/10/17

TRANSCRIPT

A group of economists here are getting a lot of media coverage here for arguing – in contradiction of the rest of the economics profession – that Brexit can be beneficial for UK trade if we have unilateral import tariff reductions. Is that possible?

It’s essentially zero chance that it’ll be beneficial on the trade front. If Britain manages to get [World Trade Organisation] normal [trade]…it’s not going to do more liberal than that…that’s not going to be a major benefit.  It looks as if the kind of invisible benefits of being part of the EU, the lack of friction, seems to have had a significant impact on trade patterns. The general thing you find in Nafta [North American Free Trade Association] and even more the EU is, if you try to quantify the tariffs that are taken away, they shouldn’t be having a really big impact on trade but nonetheless you do see a significant increase in trade relative to other trading partners probably due to assurances, lack of friction whatever. You’re reversing that, so that’s a cost. That’s much more tangible than any pipe dreams about big gains elsewhere. It’s not a huge cost – maybe 2 per cent of GDP. But it is a cost. I don’t think there’s any plausible case that Brexit is a good thing for the British economy as a whole

Some economists maintain that greater trade leads to greater productivity growth? Do you believe in that?

A little bit. You get stuff cheaper….The best way to think about it is imports….Not being part of a customs union has some kind of cost, which appears to be an a real increase in costs of buying things abroad. This leads you to produce more things that you really shouldn’t be producing because you’re inefficient at it. And so we have pretty good estimate. We can look at how much trade will increase. What’s not clear is what kind of the implicit cost that corresponds to – what do you think is the elasticity of substitution? It’s productivity, it’s cheaper consumer goods, it’s specialising in the right stuff. All of which is going to be unwound by Brexit.

The currency markets marked down the pound after the Brexit vote. So you have no problem with that judgement on the UK’s future prospects?

First of all the currency markets have no better idea of the magnitude than any of us do but that seems about right. There’s a big wild card in all this which is financial services exports. What does all this do to the City of London? That’s going to make a big difference to just how big the adverse impacts are. I think we still don’t know that. A substantial depreciation of sterling…it’s true the EU has reduced access to the UK market as well but the EU market is a whole lot bigger. So a weaker pound is pretty much what you would expect – and appropriate. If you’re going to do this thing they you do want a weaker pound.

Our foreign secretary Boris Johnson has been rebuked by our statistics watchdog recently for making false claims about how much money we send to Europe. Is this a Trump-like thing? Is it an Anglo-Saxon thing?

From Trump, it’s lies top to bottom. And not just from Trump. It’s [been] lies top to bottom from the entire Republican Party on healthcare for eight years now. There is no centre any more. There is no acceptance of expert opinion on any issue. Britain? I wonder. You may be catching the contagion from us because of how often Britain tends to follow the US cultural lead.

Studies suggest the Rupert Murdoch-owned Fox News is having a major effect on what people believe in the US. The competition authorities here in the UK are examining the Murdoch bid for Sky. What’s your view on whether that should be allowed to go ahead?

Fox is a horrific distorter of public debate. But it’s also true that the rest of the media still, after all these years…it’s 16 years since I wrote that if [George W] Bush said the earth was flat the headlines would read ‘views differ on shape of planet”. It’s still true. If there’s an issue like Brexit – or almost anything else – the media work very hard to make it appear balanced even if it’s really unbalanced. I don’t know how to improve it aside from yelling at my colleagues but when the media do reach a consensus and treat something as an established fact it also often turns out to be just wrong. So all of the assertion that we were facing a [sovereign] debt crisis [in the US] was simply reported as a fact when there was not a hint of evidence in actually behaviour of markets, or anything else, that it was true.

Five years ago you were suggesting the eurozone could go under. Now the bloc said to have turned a corner and the fears for its survival were all overblown. Do you agree?

The political durability of the euro has been greater than I understood. Why is Greece still in the euro? It’s fundamentally because the Greek elite wants to be part of it – they fear being an outcast. They are willing to put up with almost anything to stay in. That’s been a surprise. Even people like me agreed that given sufficient time and sufficient pain internal devaluation will work. If you’re willing to accept many years of high unemployment wages will fall relative to others. Spain is the demonstration of that – the auto industry is booming. But to look at the rate of change now and ignore the enormous costs that were borne in the interim is missing the story. At the moment there’s sufficient recovery in southern Europe ex-Greece that the euro probably goes on now for an indefinite period. But that doesn’t mean it’s working well. In fact you see new stories about the costs of monetary union that draw fewer headlines. At the point after Greece probably the worst performer in the euro is Finland, which no one talks about because Finland is not unstable. But their two principal exports were paper and Nokia, both of which have been hard hit by technological changes and adjustment is a really nasty thing. So the euro still looks like a mistake but at the risk of sounding a bit like Alan Greenspan, regrettably it hasn’t gotten worse! Things are not bad enough to force a revision. In fact if anything [Jean-Claude] Juncker is back hailing the euro as the future of Europe even though the arguments against it are a strong as ever.

Would you take a similar view on UK austerity? Things have picked up but it could have been better…

In the end there was quite a lot less of it than the rhetoric would have suggested but it was certainly a bad thing. UK performance over the [George] Osborne years is nothing to write home about. There is nothing that vindicates the policy. In turns out that, yes, there is some resilience in all of our economies…

What’s your personal work life balance like? Has Donald Trump upset it?

Personally I’m making a real effort. I did reduce my teaching load by shifting [from Princeton to CUNY]…I think I’ve been mostly successful in adopting the attitude that this is going to be a long haul. The [US] Republic is at risk, but I’m feeling quite a lot better about it than I did at inauguration day. It appears there is more resilience- which doesn’t mean that we’re safe. I love the phrase that what we see in the Trump administration is “malevolence tempered by incompetence”. They haven’t consolidated power. We still have a lot of effective resistance. Part of the point is it’s not just Trump. We have a very sick GOP [US Republican Party] which has a lot of support. Any quick turnaround is unlikely. There’s not going to be a silver bullet. When Trump said I could shoot someone on Fifth Avenue, there’s something like that. Very possibly a number of senior people close to him will be indicted for treason, but 35 per cent of the public will probably stay with him regardless.

Have people come around to your view that the Republican Party is the central problem, that Trump isn’t an aberration?

I’m not sure. I think there is still a strong instinct among a lot of journalists that given the slightest excuse they want to go back to “both sidesism”. If you look at how Trump reached a deal over Federal government finance for a few month – and all of a sudden we have “oh Trump has pivoted – we now have bipartisanship”. Which was insane. They were shocked when stuff went south again. For the moment, with this craziness with Graham-Cassidy [the Republican attempt to repeal Obamacare] people are admitting that Republican moderates aren’t [moderate]. But I’m still seeing articles that refer to Bill Cassidy as a serious policy wonk. Oh my god, he’s even less of one than [Republican house speaker] Paul Ryan is. I personally, even if there’s a lot more support for the view that the GOP is mad, will always be considered unreliable because I was premature.

What’s it like being in America when you have a white supremacist sympathiser in the White House? How do you cope with that?

In some ways it helps to be in New York. I get some funny emails from people. They say: ‘It’s all very well you to criticise [the brutal Arizona sheriff that Trump pardoned] Joe Arpaio but how would you feel if New York was full of immigrants?”. You look around. I have an African-American wife and it turns out that anti-Semitism is one of those things that never goes away so it doesn’t affect my daily life. Not yet – who knows what it may do [in future].

Do you devote most of your mind to the economics side of Trump?

Probably not. I read all kinds of stuff. But what I meant by daily life is I belong to a class of people who don’t get beaten up by the police. It doesn’t affect anything I see. The closest I’ve got is CUNY has a lot of student including a fair number who were affected by the Muslim ban. So I get all of that as part of community, trying to defend these people’s rights.

What do you think of that idea that liberal campus intolerance is feeding the support for people like Trump, the identity politics argument?

On the one hand it’s stupid to play into right wing caricatures of who you are. On the other hand the idea that that’s responsible for [Trump] is crazy. The overwhelming example of identity politics in America is white Christian identity politics – that’s far more important. So yes I wish Antifa [the direct action anti-fascist group] and any of these people, I wish they’d shut up or go away, and there’s a little bit of co-dependency there. The very small violent left – they’re in their element and they’re making it worse for the centre left.

As a Nobel laureate there must be a temptation to be on a plane all the time, speak at events constantly. Is that something you actively resist?

Not well enough. New York Times rules are actually a protection. I can’t go and talk to Goldman Sachs. I can got to talk at a Ruritania finance association meeting – and those can eat up a lot of time. So I have to fight and I don’t always successfully hold that down. But yeah –[there are] temptations, pressure.

Presumably they pay a lot…

[It’s] trying to realise that I’m not short of money. I am short of time. So I blow off steam on cycling trips and time in the country. My primary residence is now in Manhattan and I have country house up in Massachusetts. I came to this conference by way of Beijing and Kiev. But I had few days – instead of packing another thing in – I actually just spent the last five days walking in the Cotswolds. I’ve been before but not for a long time. It was perfect….I said I didn’t want to go to London right away. I always think of London being grey and bleak. And yeah actually, it’s grey and bleak!