The term ‘Navarro recession’ was recently coined in the U.S. media, and highlights the manner in which misguided trade and currency policies by the current U.S. administration, guided by economist Peter Navarro, may be creating distortions in the economy, leading to a slowdown. Apparently, U.S. President Donald Trump overruled all his economic advisers but Mr. Navarro in imposing new tariffs on China.
This begs the broader question of whether economies across the world are in turmoil because of the rise of the ‘Navarros’, with trained economists taking unconventional policy positions that undermine market expectations and scholarly evidence on free markets. In some cases, they seem to have received robust training in U.S. universities such as the University of Chicago. This argument applies to Brazil, Turkey, India and Hungary.
Trained in Chicago
Consider the case of Paulo Guedes, the Chicago-trained economist who was the Chief Economic Adviser to the campaign of Jair Bolsonaro and is now the Economy Minister under President Bolsonaro. While Mr. Guedes is being touted as the principal force behind the opening up of Brazil’s markets, there are also reports suggesting that he is being investigated over accusations of fraud tied to the pension funds of state-run Brazilian companies.
Meanwhile, Turkish President Recep Tayyip Erdoğan’s strategy seems to be different, in that he has nominated a body of 76 members to nine policy boards to overhaul Turkish economic policy, raising the possibility of a ‘club of Navarros’ there. In addition, the economic committee of Mr. Erdoğan includes Servet Bayindir, a theology and economics professor specialising in Islamic finance. This is interesting since, perhaps for the first time in many decades, theology and divinity are jointly influencing economic policy decisions.
Maa Sharada and Article 370
In India, Chief Economic Advisor (CEA) K.V. Subramanian, also a Chicago-trained economist, invoked Indian goddess Maa Sharada, whom he also referred to as ‘Kashmira Pura Vasini’, while welcoming the government’s decision to abrogate Article 370, the constitutional provision granting special status to Jammu and Kashmir.
One would have expected the CEA to outline a policy pathway to incentivise entrepreneurship, economic growth and development in Kashmir, but nothing much has been said on that by his office yet. This is all the more remarkable when we consider the fact that he and Finance Minister Nirmala Sitharaman are struggling to revive a slowing economy. Meanwhile, in Hungary, Lajos Simicska, an oligarch and friend of Prime Minister Viktor Orbán, guided the Orbán economics of fear and his policy of setting up of large nationalised organisations. However, he has since fallen out of favour with the Hungarian Prime Minister.
Overall, these examples point to a larger trend as the discipline of economics tries to reinvent itself to adjust to globalisation and automation, factors that have created inequality and have been instrumental in the growth of social unrest and the rise of populists across the world.
Should these ‘Navarros’ be allowed to capture the pole positions in economic policymaking and guide the new economics of a populist world? What explains their rise and unconventional stances? Even more, how are their policy ideas impacting and deepening social and economic distortions? The answers are not clear yet, but their examination cannot be postponed any longer.