Turning back the clock: the era of de-liberalisation

Before the election, no one expected such an outcome, because of Trump’s aggressive personality and strong protectionist policies. Who would have thought that the world’s No 1 leader of capitalism, which has always strongly promoted free trade as well as equality regardless of gender, race and religion, would one day go against its own foundation?
The world is now following what I call a “de-liberalisation” trend. In other words, the world now aims to go backwards to where it came from. 
Long ago, economies were mostly closed. They simply consumed what they produced. There was no movement of labour, no technological spillover, and no specialisation of skills. As a result, the variety of goods and services that one could enjoy was limited and hence economic well-being was low. 
Nowadays, North Korea is a good example of such a closed economy. Another former example was Myanmar. However, Myanmar now is rapidly opening its economy.
It is obvious why Myanmar desperately wants to trade with others. It must realise how underdeveloped it is by simply looking around the region. Thailand is far ahead of Myanmar in terms of gross domestic product, standard of living and healthcare. What makes such a difference is nothing but trade liberalisation. 
When international trade is allowed, it is possible for a country to do what it does best. If Thailand is good at growing rice, we then grow rice. If we need cars in our daily lives, we exchange rice for cars. This specialisation and trade bring about division of labour, technological transfers, and movement of labour, which increase overall productivity and raise the well-beings of all countries involved. 
So why would the US want to turn back economic evolution to be like North Korea? 
To be precise, the de-liberalisation trend began with the collapse of the US economy in 2007 (the sub-prime crisis). Many people, including economists, blamed the resulting deep recession on too much liberalisation during the 20th century. 
Loose regulation of the provision of credit and financial products generated asset price bubbles with immeasurable risks. Consequently, strict regulatory measures on financial institutions were imposed. The US Federal Reserve decided uncharacteristically to intervene in the economy by introducing irregular monetary policies like the quantitative-easing package. 
The US sub-prime crisis hit the world’s economy strongly, especially in Europe. In other words, it uncovered the chronic problem of the euro zone: the structural imbalance within the union due to the single currency and labour flows. This accelerated the debt disasters of Greece, Italy, Portugal and Spain. 
Again, the attempt to liberalise trade and labour markets within the region was blamed for such a mess. Based on all this suffering, the success of the Brexit campaign was more evidence of the end of the liberalisation era. 
Should individual economies isolate themselves? In my opinion, the answer is a big “no”. 
At the core, it is clear that international trade is beneficial. Of course, there are bumps on the road waiting for us, but it does not mean that we should make a U-turn back to where we departed from. 
In my opinion, Donald Trump’s “America comes first” policies will cause the US economy more harm than benefit. The US may lose its leading position in world trade to China. It will no longer be the place where the smartest people around the world gather. It will lose its competitiveness and become a high-cost economy. 
Perhaps the American dream truly ends here.

Dr Athakrit Thepmongkol is with the School of Development Economics, National Institute of Development Administration.