Reaganomics, Najibnomics and Trumpnomics

REAGANOMICS, NAJIBNOMICS AND TRUMPNOMICS

1. Introduction

According to experts, the global economy has now entered its sixth year of stagnation in 2016, and the growth outlook for 2017 shows a continuation of this trend. However, positive signals were shown with some countries showing strength in qualitative growth factors, such as more advanced technology, improved labour force skills, and greater productivity. However, potentially favourable factors are under pressure from ongoing political, policy, and economic uncertainties around the world. A wait-and-see attitude among corporates and governments caused further momentum on the economics risks. Disruptions from geopolitical tensions, policy uncertainties, financial market volatility and will be the main factors businesses have to prepare for. With that in check, businesses need to stay focused on the other factors concerning to growth with caution but still leveraging on the qualitative sources of productivity in times of stagnation. This trend was experienced by the Ronald Reagan’s Government throughout his first term of his presidency. While U.S. inflation rate is at an alarming high, productivity, real gross national product, and personal income remained essentially unchanged during this period, a phenomenon known as stagflation. Najib Razak recognised the recessing economic trend when he succeeded the outgoing Prime Minister and counteract with liberalising capital markets and adapting domestic policies to the growing competition for investments. Hundreds of billions worth of stimulus packages were thrown in to strengthen the domestic economy while globally it’s deteriorating. Donald J. Trump’s economic plan will be similar to Reagan’s with favours to tax breaks for families with children, no cuts to Medicare and Social Security, and his proposal to raise expenditures for defence. However, Trump’s economic policies is still in contention while he carefully plan the U.S.’ stance on the economy, domestically and globally. This study will discuss on the three leaders’ take on the economy. Reaganomics will be the base, Najibnomics will be scrutinised and Trumpnomics will be something to be carefully looked into as downward pressure on global interest rates, as monetary and fiscal policy is now expected to remain stagnant for a longer period.

1. The macroeconomic policies of each leaders

Macroeconomics is a branch of economics dealing with the performance, structure, behaviour, and decision-making of an economy as whole rather than individual markets. This includes national, regional, and global economies. Macroeconomists study aggregated indicators such as GDP, unemployment rates, national income, price indices, and the interrelations among the different sectors of the economy to better understand how the whole economy functions. Macroeconomists develop models that explain the relationship between such factors as national income, output, consumption, unemployment, inflation, savings, investment, international trade and international finance. While macroeconomics is a broad field of study, there are two areas of research that are emblematic of the discipline: the attempt to understand the causes and consequences of short-run fluctuations in national income (the business cycle), and the attempt to understand the determinants of long-run economic growth (increases in national income). Macroeconomic models and their forecasts are used by governments to assist in the development and evaluation of economic policy.

2.1        Reaganomics: Reagan’s Presidential Campaign

In January 1980, the United States entered recession which was caused by contractionary monetary policy undertaken by the U.S. Federal Reserve to combat double digit inflation and residual effects of the 1979 energy crisis. While U.S. inflation rate is at an alarming high, productivity, real gross national product, and personal income remained essentially unchanged during this period, a phenomenon known as stagflation. Two major sectors suffered double blow and failed to recover as more aggressive inflation reducing policies was adopted by the Federal Reserve in 1981. Due to the proximity and compounded effects, the recession took a toll on the United States’ economy and later the world. As 1981 began, interest rates continue to rise in an attempt to reduce inflation. The US Federal Reserve reported that there would be little or no economic growth in 1981. Reagan brought his own economic plan to the table. It started in 1980 through his presidential campaign speeches, marking the return of free enterprise principles and free market economy that had been in favour before the U.S.’s Great Depression (1929-39) and Franklin D. Roosevelt 's (32nd US President) New Deal policies. This idea got him support from the supply-side economics movement, which contradictory to Keynesian demand-stimulus economics. This movement also produced some of the strongest supporters for Reagan's economic policies during his two terms as the President.Reagan's campaign stressed some of his fundamental principles: lower taxes to stimulate the economy, less government interference in people's lives, states' rights, and a strong national defense. At the time, unemployment remained high as he took office as much as 10% rate were recorded. This is an uphill challenge for the nation. As unions and corporation alike are very vocal on the recession’s effect on them. Reagan addressed the issue when he took office.