Who is in more economic trouble? America with Trump or Britain with Brexit?
The comparisons between the Brexit vote and the likely victory for Donald Trump in the US Presidential election have been flowing all night.
That’s true in terms of the gargantuan shock of the result, which has confounded pollsters’ confident predictions and dramatically overturned financial markets’ expectations.
But the longer-term economic implications of both events could also be comparably significant.
Below we look at the areas of economic life that are likely to be affected and contemplate who – America or Britain – is likely to have it worse in the years ahead.
One of the pillars of Donald Trump’s campaign has been hostility and anger over free trade deals signed by America in recent decades, especially the North American Free Trade Agreement (NAFTA) which he claims have been responsible for hollowing out American industry.
He has also been belligerent towards China, claiming that the world’s second biggest country is undervaluing its currency to gain an unfair trade advantage with America, again harming American workers.
But if Trump delivers on his protectionist pledges to tear up trade deals and even block imports virtually all economists believe this would make the overall American public significantly poorer, not better off.
The Leave campaign in the Brexit referendum sang a different tune.
Its leading lights claimed to be pro-free trade, even promising more of it if Britain left the EU. And Theresa May’s government is plainly keen on maintaining the UK’s existing trade arrangements.
Yet there is a serious risk that if the UK cannot agree a comprehensive free trade deal with the EU within two years of invoking Article 50 with the EU we will have to fall back on trading under World Trade Organisation rules with the rest of the continent.
That would mean tariffs on our exports to the Continent and tariffs on imports too.
And economists warn that will make us worse off by pushing up prices.
Protectionist policies from Trump would raise prices in the US.
And the dollar has fallen in the wake of the vote, which could stoke inflationary pressure in America.
But the dollar is also the ultimate safe haven currency, which should prevent a near term collapse.
The greater danger is if Trump interferes with the independence of the Federal Reserve, America’s central bank, which is not impossible given his criticism of the institution during the campaign.
In September Trump said the Fed’s chair, Janet Yellen, should be “ashamed” of her policies.
If the Fed’s independence goes under Trump and financial markets lose confidence in the US monetary system a damaging inflationary spiral is not impossible.
In the UK, Brexiteers have also criticised the Governor of the Bank of England, Mark Carney and tried to push him out of his job.
But Carney has confirmed he will stay until 2019.
The bigger inflationary danger for Britain comes from the fall in sterling, which is down around 18 per cent since the 23 June vote.
This is expected to send domestic inflation up sharply very soon, which will make Britons worse off.
Given this, it seems safe to assume that under a President Trump immigration to the US would become significantly restricted.
That is likely to reduce the US per capita economic growth rate, by reducing the ability of the US to fill gaps in its work force and also by curtailing entrepreneurship and productivity growth.
The similarities to Brexit are clear. The Leave Vote was won on the back of a strong anti-immigration sentiment. And Theresa May has made curtailing net immigration from the EU her primary goal in the EU divorce proceedings.
As in the US, economists expect this to make the UK poorer overall since immigrants are seen as bringing a net benefit to the British economy and enhancing our prosperity.
Trump’s economic policies were threadbare and incoherent. But he did say that he would cut income taxes.
Yet the detail of those plans suggest the major beneficiaries will be the well-off, rather than ordinary middle-income Americans.
And the implication of cutting taxes is that there will be less money to fund public services such as healthcare. America will have to either cut services, or their quality will deteriorate, or the US will have to keep piling up ever-larger government budget deficits.
The Brexiteers made no promises to cut income taxes. And Theresa May has not made it her priority.
But to the extent that the pain of Brexit leads to a smaller economy it will make it harder for the UK to finance its public services and finance transfer payments such as pensions.
Trump has promised to reverse President Obama’s healthcare reforms, which brought millions of poor Americans into the insurance safety net.
If he delivers on that promise those Americans will be immediately worse off.
But all Americans are likely to suffer too since those reforms, over the medium term, were a powerful means for the US to rein in massive private healthcare inflation rates.
The Brexiteers notoriously promised £350m a week in extra spending for the NHS during the referendum campaign, which they said would be paid for by cancelling the UK’s payments into the EU Budget.
But that was a spurious figure because it took no account of the UK’s EU budget rebate – and, in any case, Brexiteers have since dropped the claim.
The NHS is facing serious financial pressures in the years ahead due to growing demand from an ageing population. To the extent that the economy suffers due to Brexit the ability of Theresa May’s government to devote additional resources to the NHS will be diminished.