When a political rupture of the Donald Trump kind happens, it’s natural to wonder if the sky is about to fall – whether economic and social chaos will ensue.
There are two answers to that question – the one most commentators were giving just before the election, and the one that made sense just after President-elect Trump’s acceptance speech.
That speech made everything that preceded it seem like a bad dream – trade war with China, attacks on religious and racial minorities, unaffordable tax cuts made worse by spending splurges.
But lo – at the dawn of the Trump era we met a soft-spoken, avuncular Mr Trump telling us he’d work with every race and religion, reach out to every nation, and bury the hatchet with his Republican Party foes.
He even thanked Hillary Clinton for years of service to the nation. I guess that means she’s not going to jail?
Market reaction was swift. Before the speech, futures markets expected the New York and London’s stock exchanges to drop 3.4 per cent each – the kind of shocks seen during the GFC.
But a short time afterwards, the London market began trading down 0.6 per cent, and Wall Street futures were pricing a more moderate fall of 1.4 per cent.
The two Trumps
That’s an astonishing turnaround, based on a few well delivered lines from Mr Trump – a man, remember, whose election campaign was peppered with untruths and who, if his acceptance performance is to be believed, was lying about most of his big-ticket promises too.
If the voters are right, and Mr Trump actually plans to introduce 45 per cent tariffs and to expand spending while slashing corporate taxes, then the great reality TV star has duped international market traders with just a few words.
Or if the traders are right, then Trump’s campaign promises were all hot air and his reform agenda will not be the cause of a new global recession.
It’s hard to see how they can both be right.
An election or a movement?
As the Trump election victory firmed up late on Wednesday in Australia, our former foreign minister Bob Carr has called the victory a “tectonic” shift and “the end of the post-war economic order”.
Mr Carr may soften those judgements in the days ahead, though he can’t be blamed for making them at the time.
Because whatever Mr Trump said on election night, political pundits everywhere had been in broad agreement as to how the 69-year-old property tycoon got this far – he’d identified a structural change in the electorate, and used every trick in the book to win over a new kind of swing voter.
That structural change is frequently described as ‘disaffection with globalisation’, but I have argued that it is more recent and specific.
The post-2008 global financial crisis created massive resentment towards the political classes, who were seen to have protected the banking system at the expense of other businesses and jobs, not to mention families’ life savings.
The cosy relationships between Wall Street and Washington, between central bankers, trade negotiators and Congress, filtered through to the people who have just voted for Trump.
While its true that many of them saw their jobs dying off before the GFC, it was the post-2008 that exposed “the swamp” of political masters and where their priorities lay.
The Trump campaign put a stick in those voters’ hands and pointed to a piñata full of potential economic goodies. If we all hit it together, Trump argued, how can we lose?
The trouble ahead is that the laws of economics – or more precisely the laws of political economy – will apply just as much to the coming administration as to the last one.
Mr Trump put particular emphasis on infrastructure spending in his acceptance speech – roads, bridges, hospitals that would be “second to none” for the first time in generations.
But how can that can be squared with slashing company taxes by more than half? More debt in the short term is the answer.
After that, says the President-elect, a booming economy will pay enough taxes to cover all the bills. Hmm. Or maybe he won’t do any of it?
And so election night ends with a paradox.
Either Mr Trump meant what he promised during the campaign and will drive his rapturous supporters over an economic cliff, or he was just kidding – in which case, his voters will be furious, but might actually be better off in four years’ time.