Neither Trump nor Modi can ever be written off

As the global outrage over Donald Trump’s tariff policy mounts, it may be time for us to look at the experience of Narendra Modi.

If you listen to American and British commentators what Trump is doing has only one recent parallel: the disastrous decision by former UK Prime Minister Liz Truss to overhaul the British economy by introducing a slew of unprecedented measures including a massive reduction in tax rates.

 

Truss’s policies were widely derided and she was driven from office becoming one of the shortest serving UK Prime Ministers in history.

 

   Trump’s critics like this parallel because it illustrates the dangers of radically tampering with an economic system that has been to shown to have stood the test of time. Just as Truss faced disaster, say many experts and political commentators, Trump will soon be forced to overturn his initiatives as their consequences overtake his current popularity.

 

   Well, yes, may be.

 

   Certainly no American President has ever attempted to do anything as radical in the face of opposition from nearly every serious economist.

 

   But there is also another parallel, one that Americans are less familiar with but which we know only too well.

 

   Narendra Modi and demonetisation.

 

   The parallels between Modi and Trump have often been commented on favourably by the Prime Minister’s own supporters. Right from his first term Donald Trump has been a hero to many BJP loyalists who talk with pride about the friendship between Trump and Modi. Even his decision to send illegal Indian immigrants back home in chains has not dented the BJP’s fervour for Trump. Now, despite the impact of his tariffs which is likely to be damaging for the Indian economy, the love fest continues. The party line is: yeah may be they will hurt us but they will hurt other countries more, so hurrah for Donald!

 

   There are more significant parallels. Both men are essentially outsiders who have become villains in the liberal narrative. Both rely, to varying degrees, on identity politics. Both have often been written off only to bounce back stronger. Both are more popular than their parties. Both demand - and receive- total loyalty and unquestioned obedience from their supporters. Both have ignored the traditional media which they have claimed is dishonest and biased against them. Both believe they have been elected not just to govern but to transform.

 

   By and large both have achieved what they set out to do. The India of 2013 now seems like a distant memory; totally unlike the post Modi India of today. In America, Trump has changed the rules so comprehensively that he was able to challenge the result of a Presidential election without any evidence and treat those who violently ransacked Congress on January 6, 2021 as heroes who stood up for liberty and justice. Over the last month he has taken action against any prosecutor who dared hold the January 6 attackers to account.

 

   There is more. Both men are masters of the politics of grievance. Modi has told audiences that they no longer need to be ashamed of India; arguing that the country he took charge of was a corrupt scam-ridden mess.  He has cleaned it up, he suggests, so Indians can be proud of our country again.

 

"If the world’s economists are right then Trump’s tariff policy will end up being a bigger disaster for the US than demonetisation was for India."

   ‘Drain the swamp’ was one of Trump’s slogans but it could easily have been used to sum up Modi’s appeal in 2014. Trump has now gone further, telling Americans that their country has been pushed around for too long by other nations. They drain America’s resources by demanding security protection while making it difficult for the US to sell goods in their countries, he says. No wonder, he continues, that American manufacturing is in crisis, jobs are being lost and the US has a huge trade deficit.

 

   When you make such huge claims, you need to do something equally huge once you are elected, to demonstrate how you are changing things.

 

   For Trump the tariffs are his way of saying that America will not be pushed around any longer. There is a certain logic to what he is doing. He wants to destroy the current world economic order and to stall the rise of China. He hopes to effectively devalue the dollar and make US exports more competitive while reducing the real dollar denominated wealth of countries like China (the largest holder of dollars outside the US) and crippling their export-led economies. In the process US manufacturing will revive, jobs will be created and America will gain.

 

   It doesn’t sound so bad in theory. But then neither did demonetisation.

 

   The argument for demonetisation was not a new one and it sounded simple enough. Too much wealth was held illegally in cash, it said. So, suppose you made all that cash worthless at a stroke? Honest people would not suffer because banks would accept your cash: except that you had to explain how the money had been earned. Crooks who could not offer adequate explanations would find that their cash was worthless and black money would be severely reduced, if not mostly eliminated. It was the best way of cleaning up a scam-ridden country.

 

   We all know that it did not work. Not only did it hurt honest citizens and damage the economy but it made no real difference to black money: levels of cash in the system are even higher today than they were before demonetisation.

 

   But here’s the thing: even in the short term it made no real difference to Modi’s popularity. He went on to win the next two General Elections and is still a popular Prime Minister over a decade later. His supporters accept that demonetisation failed but they don’t hold that against Modi. Instead they see it as proof that he was willing to do something radical and unprecedented to change the system.

 

   If the world’s economists are right then Trump’s tariff policy will end up being a bigger disaster for the US than demonetisation was for India. It will also severely damage the global economy.

 

   And even if Trump is right, there will be months and months of suffering for Americans as prices rise and any increase in manufacturing will take a long time to show up. Trump says he knows this. His advisers say that a mild recession (which now seems inevitable) is the price America will pay for resetting the global order.

 

   The consensus is that as the pain mounts, the administration’s popularity will plummet and Republicans will begin losing Congressional races. There will be so much pressure that Trump will be forced to reconsider and roll back parts of his policy.

 

   That sounds reasonable enough. But Trump is not a reasonable man. Like Modi he makes his own rules and makes the unthinkable seem entirely normal.

 

   There is one other factor. Demonetisation happened early in Modi’s term. Trump is a kind of lame duck President. Under the US Constitution he cannot serve a third term. (Though even that may change; with Trump anything is possible.) So he no longer needs to care about popularity. He needs to worry about his legacy.

 

   He really has very little to lose. If the scheme fails (which it probably will) his supporters will say (like Modi after demonetisation) that at least he sincerely tried to do something radical.

 

   If it does succeed, however, then he will go down in history as the man who transformed America’s place in the world. And then, even the Constitution will be his to amend.

 

   Either way, Liz Truss is the wrong parallel. Look at Modi instead. Neither Trump nor Modi can ever be written off.