Now that President Trump (it feels weird to write that) has entered the Oval Office and seems to have every intention of following through on an ‘America First’ platform, the paradigm that has governed the global political and economic order appears set to shift in ways that will be a significant change from what we have seen over the last generation or two.

One change is that it appears (based on what we know about Trump’s cabinet picks) that U.S. foreign policy is likely to have a more realist approach to it than in the past. The last three Presidents have engaged in foreign policy that was not interest-based, but rather based on their view of what America is or should be. Clinton used American armed forces in an altruistic manner to show that America is good. Bush used America’s armed forces to promote democracy (with the idea that would make us safer). And Obama basically tried to placate our enemies and disrespected our friends (with the idea that this would make us safer if our enemies didn’t hate us so much). All three of these approaches contain elements of simplistic, almost childish assumptions that either overestimates the capabilities of America (Bush trying to reshape foreign cultures in America’s image), or assumes that America needs to not be so “mean” or “pushy” or try to pursue its interests (Clinton and Obama).

Trump appears to recognize that America has the right to pursue its interests like any other country, that it should be willing to engage in alliances of convenience where necessary (i.e. with Putin if necessary), and that it shouldn’t try to make other countries be more like us or to like us at all. It appears that foreign policy under Trump will start with the world as it is, rather than how we would like it to be. By being based on realistic assumptions, Trump’s foreign policy has a better chance of success (from America’s perspective) than some recent Presidents.

Another aspect that will change is that economic policy (i.e. trade policy) is likely to be evaluated based on how it impacts America. While the Washington consensus over the last generation is that free trade is a good thing that leads to higher GDP growth (which it does, all things being equal, just in case you were wondering), the fact is that free trade has decimated certain sections of the country. In economic theory, free trade is good because not only does the economy get more stuff at a cheaper price, but the workers displaced out of the old inefficient industry (that gets offshored) can be used in more productive industries (which ultimately results in higher pay making them better off too). The fact of the matter is that this has not happened. Part of it is that the world that exists in economic theory doesn’t exist in reality. We don’t have a free market. Our economy is over-regulated. This hinders the formation of new businesses and new opportunities that might allow displaced workers to be absorbed at wages similar to what their old jobs were. What America has been doing over the last two generations with its promotion of free trade, increased globalization, and increased domestic regulation is that it has fostered the growth of middle classes in other countries, by decimating our own. While this (and the collapse of the Soviet Union) resulted in a world where America was at the single hegemon holding the world economic system together, it is also clear that many Americans are tired of paying the price for something where the tangible benefits accrue to other people. We can expect that as America begins to pursue its own narrow interests at the expense of others, the middle classes in other countries will weaken, perhaps leading to political change that lessens (not eliminates, but lessens) their ties to the United States. This will create an opening for our rivals China and Russia to begin to influence nations that they may not have been able to influence before.

 While many will decry Trumps policies (and some will undoubtedly deserve to be condemned), what we are getting is the natural result of multitudes of decisions that have been taken over the last 40 years. The world is moving towards a multi-polar international order because America has weakened (as nations and empires tend to do over time), without anyone noticing. In some ways, the forces that propelled Donald Trump to the Presidency can also be seen in other countries as well. Someone like Donald Trump does not become President because a country that is basically functioning pretty well gets drunk one night and wakes up to find that they have elected this man. Someone like Donald Trump becoming President happens because the system stops meeting the needs of a significant fraction of the country.

When a system stops meeting the needs of its people for a short time, the people simply vote the other party into office. When the system stops meeting the needs of its people for a long time, you get a Donald Trump. An ‘America First’ program will reshuffle the deck so to speak and redefine America’s place in the global order. While this may or may not end up being a good thing (it will depend on what policies are ultimately pursued), the shift is more due to a recognition as to how the world has shifted over time. The Trump Administration will not be inconsequential.

This week, Donald Trump will take the oath of office to be the 45^th President of the United States. While predicting the course of an Administration in advance is liable to make one look extremely foolish in hindsight, the idea that Trump could end up being one of the most consequential Presidents in at least one, maybe even two, generations is not as absurd as it may seem.

Firstly, the horrified (and if one is being honest, even occasionally unhinged) reaction of many to Donald Trump the candidate AND Donald Trump the President-Elect (and not only on the left) is an indication that much of what we have known as the institutions (political, economic, and cultural) throughout our lifetime feel under threat (for better or worse). As vilified as Mitt Romney was, one has a hard time imagining the vast protests, the hysteria, and the attempts at delegitimization such as we are now witnessing, would have occurred had he managed to beat Obama in 2012. As hated as Mitt Romney was on the Left, he was a man of the establishment, largely polite, and a go-along-to-get-along type who would likely only have changed things at the margin. But with Trump, you have someone who not only is a brawler, but also enjoys the fight. It is almost like General George Patton with a Twitter account. In other words, some change is coming to the established institutions (how much remains to be seen, but it is unlikely to be zero). Usually when change happens, it is to the disadvantage of the “in-crowd”, hence the fear is that it could be a lot.

Secondly, Trumps Cabinet picks largely (with a couple of exceptions) seem to be reasonably solid. True, they are not picks that Hillary Clinton would have made, which by itself is going to upset a lot of people. But contrary to the anticipation/worry of some (on both sides of the political aisle), Trump has not loaded up his Cabinet with a bunch of Sarah Palin-types (i.e. people who are extremely ideological with thin resume’s and limited knowledge of the world). In addition, many of these people are coming into their roles with the idea of reshaping (or even substantially curtailing) the agencies that they are heading up.

These factors indicate that a serious attempt is going to be made to make major changes, and that the regulatory state is likely in for a makeover. Over the last 80 years, the regulatory state has kept expanding. Sometimes the expansion has been quick, and other times it has been slower, but the direction has always been the same. Furthermore, periodic regulatory reform has almost always meant more regulations being piled on top of old regulations. While lack of regulation is not what is ideal, for the last 80 years, the phrase ‘better regulation’ has nearly always meant ‘more regulation’. With the Trump Administration, it is possible to imagine a partial rollback of the regulatory state as well as a modified regulatory structure that better reflects the realities of a 21^st century global economy. With shifting regulation, the rules of the economic game will shift, and with it the winners and losers.

Four to eight years of a Trump Administration could see a fundamentally changed economic landscape from what we are used to seeing, for better or worse. It is time to get ready.

Well that was fun. Another year in the books and for once it was a year that probably won’t be soon forgotten in that it was a very historical year. The word ‘historical’ often gets thrown around too loosely, because many people (i.e. members of the media) don’t really have a historical perspective. They get caught up in the stories of the day and declare this or that to be of great historical significance because of how they feel about it. But for something to be of truly history book significance, it has to be an event (or series of events) that is either the culmination of some underlying heretofore unnoticed trends, or something that sends history down a completely different path. For example, the assassination of Archduke Ferdinand in 1914 that led to World War 1 was such an event, because without WWI, the world today looks completely different as to be unimaginable. The attacks on 9/11/2001 were also such an event. The collapse of the Iron Curtin in Eastern Europe in 1989 was the culmination of certain trends that had not been widely noticed before. The point is that as 1914, 1989, and 2001 came to a close, we knew at the time that we had experience an ‘historical’ year.

And so it is with 2016. The Brexit vote, along with Donald Trump’s election win (as well as Bernie Sanders primary challenge to Hillary Clinton), revealed a deep-seated disenfranchisement of large segments of the population with the political class. While Donald Trump ran under the Republican banner, his victory was as much a slap at the established Republican Party as it was the Democrat Party. And Brexit was led by the head of a minor British political party, although with some major support with the established Tory Party. But what makes these elections different from prior elections/referendums is that in one case a country is fundamentally trying to change how it is governed (i.e from the E.U. in Brussels with an assist from London, or just from London), as opposed to just who is doing the governing. In the other case, this isn’t simply a change from the standard established politics of the Democrat Party for the standard established politics of the Republican Party. What we have is a person who is effectively creating a different governing coalition, even if he himself really isn’t actually aware that he is doing it. It is basically a non-violent (at this point) rebellion that instinctively trying to tear down an existing system that a large fraction of the population on both the center-left AND the center-right don’t feel is benefitting them and is being run to their detriment. The point is that the election of a political novice with no experience to the most powerful position on the planet is the ultimate vote of “no-confidence” in the existing system. And the fact that he is appointing people to head up agencies that they personally have opposed is a sign that he is actually serious about changing the game.

In short, many assumptions that have governed the U.S. (and by extension the international system) for last 25 years in some cases, and since WWII in other cases, are being upended. The year 2016 is likely to go down in history as one that was extraordinarily impactful.