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Prejudice, Racism Is 'Unambiguously Bad' for Any Economy

Prejudice, Racism Is 'Unambiguously Bad' for Any Economy

By    |   Monday, 15 January 2018 09:27 AM

President Donald Trump declared at his Florida golf club on Sunday that he was, quote, “the least racist person you've ever interviewed.”

The statement followed allegations of President Trump’s “remarks” he, again, allegedly made about Haiti and Africa last week during a private meeting where the subject of the meeting was that Congress is currently seeking a bipartisan compromise to salvage the Deferred Action for Childhood Arrivals program, or DACA.

The incident has prompted forthright condemnation from both the United Nations (UN)  and the African Union (AU), while politicians from both main U.S. parties described them as racist.

The situation has economic and political implications.

Both ultimately will matter to investors.

The economic situation is the idea of “tipping points.”

While many people may deplore the alleged remarks, the fact is that the expression of such views can shift what is considered to be socially acceptable.

If social norms tilt toward accepting a little more prejudice, then an economy will suffer.

Prejudice is unambiguously bad for an economy, and the prejudiced country will never be great in the modern world.

The political situation is the extent to which such allegations motivate opponents of Trump.

U.S. midterm elections tend to be won by getting one’s own supporters to turn out, rather than by swaying floating voters or converting supporters of the opposing party.

The election for the governor of Virginia and for the vacant Senate seat in Alabama recently, both showed the force of an angry motivated opposition.

Opinion polls struggle to capture such political forces, which may increase market uncertainty ahead of this year’s midterm votes.

As an aside of all of this, the U.S. Government has also a shut-down debate, which includes the controversial issue of immigration, will continue this week.

Over in Europe, German politics has also featured over the weekend with the provisional German coalition deal raising some objections from within the proposed junior partner, the Social Democratic Party (SPD).

Some relatively high-profile SPD politicians have suggested that the provisional deal does not offer the SPD enough.

The provisional deal needs to be agreed by a party congress and the final deal will need to be agreed by the whole membership of the party for the government coalition to go ahead.

Meanwhile, the existing coalition government carries on a caretaker role.

Although the German government can function perfectly well on automatic pilot for the time being, there are implications from this beyond Germany’s borders.

The direction of European reform, aside from the pressing issue of whether the French baguette should be listed as a UNESCO cultural treasure and the ever-tedious Brexit negotiations are both affected by all of this.

More immediately, the Euro area has put out their trade data today that showed that exports of goods to the rest of the world in November 2017 was 197.5 billion euro or $243 billion, which is an increase of 7.7 percent compared with November 2016. Imports from the rest of the world stood at 171.2 billion euro or $210 billion, a rise of 7.3 percent compared with November 2016.

Exports to the U.S. rose 3.2 percent from a year ago (y/y) while imports from the U.S. rose 2.3 percent y/y.

Now, investors should keep in mind that this is not typically a central issue for financial markets. The complexity of global supply chains is such that trade data on a national level has lost some of its importance when compared to the mercantilist past.

However, trade tensions may be about to increase, at least if the flurry of comments over the North American Free Trade Agreement or Nafta  is anything to go by

Countries or regions with trade surpluses may therefore find an unwelcome and perhaps unnecessary spotlight of attention being directed at their data. 

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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Prejudice is unambiguously bad for an economy, and the prejudiced country will never be great in the modern world.
prejudice, bad, economy, investors
Monday, 15 January 2018 09:27 AM
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