Prognostications of what the New Year might bring are more often than not a fool’s errand and pundits are usually better served with a laconic “more of the same” answer to what to expect. Usually, but not this time, for 2017 promises to be a very different year and quite possibly the beginning of a new geopolitical era. The last such watershed year in recent history was 1980 and it is worth remembering briefly the momentous changes ushered in by that year.
The 1970s were a decade marked by a seeming retreat by the United States as the dominant Western power and a commensurate increase in the status and military might of its chief protagonist – the Soviet Union. Beginning with the Arab oil embargo in 1973, the US had proven economically vulnerable, on top of the continuing trauma of the Vietnam war debacle and the Watergate scandal. Faced with the growing challenge by Soviet communism, America seemed to be affected by a “crisis of confidence” exemplified by President Carter’s ‘malaise’ speech in July of 1980. Its best days were in its past, preached this Kissingerian doom and gloom school of thought and its best option was to walk quietly and peacefully into the sunset by means of détente and arms control agreements with the Soviets.
Yet, even as Carter preached his tales of woe, a powerful counter-narrative was gathering force across the land resulting in Ronald Reagan’s landslide victory in November 1980. Communism, based as it was on political oppression and an irrational economic system, was surely evil, but it was also weak, argued Reagan, and America was certain to win any arms race and competition with the Soviet Union and should not shy away from confrontation. And so, the new administration introduced a series of policies, open and clandestine, to neutralize Soviet hegemony over Eastern Europe, support Moscow’s enemies from Solidarity in Poland to Afghanistan, disrupt the Soviet economy by all means available and force it into an arms race it could not afford through a sustained American rearmament. Less than nine years after the inauguration of President Reagan, the Berlin wall fell and two years later the Soviet Union itself no longer existed.
For many it may be a stretch to compare the Trump victory with the Reagan revolution, but there are great similarities in many of their essential characteristics. Trump’s announced economic policies, based as they are on cutting taxes and easing the stifling regulatory burden on business are remarkably similar to Reagan’s policies that resulted in 25 years of prosperity. Both Trump and Reagan came to power as a reaction of the public to the failed policies of the preceding administrations and a seeming desire for the radical change promised by them. And both seemed to be riding a wave of support for conservative solutions that, in Reagan’s case, led to three consecutive republican presidents. We don’t know what Trump will do yet, but it is a fact that the republican party has seldom been as dominant at both the federal and state levels as it is now. At the federal level, the GOP controls both the executive and legislative branches and will soon control the judicial branch as well, while at the state level, it dominates state legislatures by a better than two to one margin (69 to 30). This dominance has a number of important implications for the political fortunes of the Trump administration. Traditionally, the American president is the titular head of the ruling party. This is not the case with Trump, who at times campaigned against the republican establishment and often appeared to advocate various policies (pro-Russian, anti-free trade) that go against established republican traditions. He will quickly find out that working with the GOP is likely the key to a successful administration. Conversely, a conflict between the two will be more detrimental to Trump than the republicans, which is why he will try to avoid it.
So what should we expect to see from the Trump administration? What is already clear even before his inauguration is that President Obama will leave no lasting legacy and the little that’s there will be undone in very short order. Domestically, that means the disastrous Obamacare and the hundreds of executive orders and regulations through which Obama ruled or rather misruled in Trump’s opinion. It is already evident by the reaction of the US and world markets that the promised tax cuts and deregulation are seen as very positive for business and likely to enjoy wide support in Congress and outside of it. If this leads to higher growth rates as expected, Trump’s economic agenda could also serve as an example for the stagnating economies of the West as a whole.
In the foreign realm, the failure of Obama’s policies is even more pronounced. His supporters claim the nuclear deal with Iran as his signature achievement and that’s what Trump has repeatedly said he will cancel at the first opportunity. Other than that, Obama became known for “leading from behind,” hardly a great recommendation for the leader of the free world. Here are the most likely developments in the three theaters of greatest interest to Bulgaria:
The EU and NATO
During the election campaign, Trump regularly excoriated America’s European allies for refusing to spend adequately on defense with very few exceptions. This remains the most serious bone of contention and one of which, Germany, Europe’s richest NATO member is especially guilty. In the aftermath of Trump’s election, the Europeans have for the first time in years started talking about greater defense expenditures. If this talk turns into policy as widely expected, Trump’s dire warnings could actually save NATO rather than destroying it. There are a number of other serious threats the EU faces that could put the Euro-Atlantic alliance at risk. As in the US, the European Central Bank’s policy of printing money, euphemistically called “quantitative easing” and paying private debt with public money cannot continue for long. It is high time for the EU to consider serious structural reform of the kind proposed by Trump and go back to the original promise of united Europe of Adenauer, Schuman and De Gasperi, rather than the socialistic, undemocratic and bureaucratized monster it has become. As a first order of business, it has to admit that Angela Merkel’s invitation to millions of economic migrants was a colossal mistake and must be rescinded. If not, Germany could easily end up next September with a leftist government, like the current coalition of socialists, former communists and the greens in Berlin, that is not only anti-American but also decidedly pro-Putin. The EU cannot survive that.
Pundits left and right have already proclaimed 2016 to be the year of Putin. In reality, Russia under Putin continues its inexorable decline in all measures of economic and state power. It is often forgotten that Putin’s ‘gains’ in Crimea and the Donbass are very poor compensation for losing Ukraine, without which Russia can never be a great power. Its GDP today is half of what it was in 2013, private consumption has slid 15% in two years and both government social programs and investment continue shrinking, as have the various reserve funds it had set aside earlier. Most experts expect those to be depleted by the end of 2017. While Russia has avoided an economic collapse so far, the long-term trends do not augur it well and it is unlikely that it will recover economically without a major boost in the price of oil and gas on which it continues to be largely dependent. And given Trump’s promise to open US federal lands and the shelf to exploration and production, it is very likely that hydrocarbon supplies will expand keeping prices low.
The most crisis-prone part of the Eurasian landscape today is without a doubt Turkey – a key NATO ally. Over the past year it has transited from an Islamist authoritarian form of government to something that strongly resembles an Islamist dictatorship with Erdogan increasingly acting like a totalitarian boss. Following a failed putch by elements in the military, Erdogan has carried out a massive purge of real or imagined enemies while brutally suppressing the last vestiges of freedom of speech and even basic human rights. With the state of emergency now extended indefinitely, Turkey already rivals Russia for the title of the least democratic state in Europe. With most legal opposition, such as the Kurdish HDP, suppressed or cowed, Erdogan faces few hurdles in his quest to be anointed a president with all the powers of a dictator.
There is however an increasingly heavy economic price that Turkey is paying that may doom Erdogan’s dictatorial ambitions. He may succeed as a dictator, but it is not clear that Turkey has an economic future outside the community of democratic nations. The signs of economic deterioration are everywhere. Turkish GDP shrank by 1.8% in the third quarter of 2016 and the fourth quarter is not expected to be better. Overall, GDP for the year is not likely to be better than half of the 3.2% the government projected at the beginning of the year. Two of the international rating agencies (Standard & Poor and Moody’s) have already given the country a junk (non-investment) rating and the third one is expected to that soon as well. The Turkish lira has depreciated dramatically vis a vis the dollar, which is very serious matter for a country that needs to attract a minimum of $38 billion per annum to fund its forex deficit.
There are further disturbing foreign-political trends facing Ankara. With his typical arrogance, Erdogan has crossed another line by openly accusing the United States of supporting the terrorists of ISIS, after blaming it for conspiring with the coup plotters. He could get away with such provocations under Obama, who had unwisely declared Erdogan a model for all Muslim states to follow, but it is not at all clear that Trump will put up with that. It has been clear to Washington for quite a while, that Erdogan has no interest in combatting Islamic terrorism and considers the Kurds his main enemy. This, of course, runs counter to the Trump’s promises to destroy ISIS as a first priority. There is also growing evidence that the European Union is itself growing tired of Erdogan’s constant blackmail with respect to the migrants he threatens to unleash unless he get his way. Erdogan may well succeed in becoming the unchallenged Islamist potentate of a totalitarian Turkey, but it may turn out to be pyrrhic victory.
By Alex Alexiev