Former chief economist of the International Monetary Fund (IMF, 2003-2006) and former governor of the Indian central bank (2013-2016), Raghuram Rajan is one of the rare economists to have anticipated the 2008 financial crisis. This professor at the business school of the University of Chicago believes that Western countries which want to protect their industries overestimate the impact on employment and pleads for indebted countries to default instead of sacrifice their education and health expenses.
How do you explain Donald Trump's victory?
Over the last twenty years, there have been numerous job losses in developed countries, particularly middle-income jobs which could be occupied by people without qualifications. These destructions have generated a feeling of frustration, also fueled by growing precariousness. This anxiety is amplified by the speed of technological change. It is machines or computers that replace humans in routine tasks, whether on an assembly line or in an office. However, it is much easier to point the finger at the factory that moves abroad.
This fetishization of manufacturing is overblown. Firstly because the jobs which have disappeared from developed countries are not going to come back and secondly because the industry is creating far fewer jobs than before. It is now capital intensive and no longer labor intensive.
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With Trump's return to the White House, should we prepare for new trade wars?
There are countries with which tariff blackmail serves as negotiating leverage, when Donald Trump threatens, for example, Mexico with customs duties if it does not improve its fight against drug trafficking. Often, it stops there. The case of China is different and responds to two logics. Among Mr. Trump's advisers, there are those who believe that increasing customs duties will create jobs in the United States. But there are also those who want to contain China's expansion. All this leads me to believe that Washington will take measures against Beijing. And if Chinese exports fall significantly, this will also lead to a drop in its demand, which poses a problem for the rest of the world.
Luxury brands will, for example, suffer the consequences, but also developing countries that sell their raw materials to China. And this time, Washington will not let Chinese imports pass through other countries, such as Mexico or Vietnam. Moreover, Mr. Trump threatened to impose 100% customs duties against electric vehicles assembled by the Chinese manufacturer BYD in Mexico. The next trade wars led by Mr. Trump will be more and more indiscriminate, they will no longer differentiate between China and other countries, they will therefore be much more serious.
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