2024-11-20 10:00:00
Trump, during a visit to a Sprankle’s store, in Kittanning, Pennsylvania, September 23, 2024. ” sizes=”(min-width: 1024px) 556px, 100vw” width=”664″ height=”443″/> US President-elect Donald Trump sees himself as a Roman emperor, ruling the country from his palace in Mar-a-Lago, Florida. Will he know the fate of Diocletian, who reigned over Rome between 284 and 305? He too found himself confronted with a country angry with inflation, creating great social and political instability. Unable to curb the rise in prices, caused by the continued devaluation of the currency, he opted for a general blocking of the price of more than a thousand food and industrial goods through a “maximum edict” which also capped the salary level. Known to all economists, this solution ended in resounding failure, pushing trade towards barter and ultimately destroying confidence in money.
Even before the invention of money, all the leaders of the world grappled with the phenomenon of a general and lasting increase in the value of goods, the definition of inflation. And the latter has often guided the course of history. Many analysts and economists point to the responsibility of the inflation of the last two years in the United States in the triumphant election of the future president. “It is the major subject of this election with immigration, especially among the most modest, assures Thomas Philippon, professor of finance at New York University. Without inflation, the score would have been much tighter and more uncertain. »
Surprising in a country with a thriving economy, low unemployment and inflation which fell below 3% this summer. But that’s not what the Americans looked at. They have seen that, since 2020, the prices of food and energy, those that we see on a daily basis, have increased by almost 25%. In May, Harvard economist Professor Stefanie Stantcheva conducted a broad investigation on the feelings of the population. More than 70% of those questioned felt that their purchasing power had deteriorated. And, when it comes to naming someone responsible, they point to the Biden administration as a priority. Second comes the other culprit, especially among Democratic sympathizers: the greed of the companies who took advantage of it to increase their profits. Far ahead of traditional explanations such as shortages, geopolitics or energy prices. Of course, there were salary increases, but they came too late to erase the trauma of the brutal increase in 2022-2023.
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What historical lessons does Thomas Philippon draw from Emperor Diocletian’s price controls in the context of current economic management?
**Interview with Thomas Philippon, Professor of Finance at New York University**
**Interviewer:** Thomas, thank you for joining us today. In light of recent events, particularly Donald Trump’s election as president, you’ve mentioned that inflation played a crucial role in the electoral outcome. Can you elaborate on that?
**Thomas Philippon:** Absolutely. Inflation has been a significant concern for many Americans over the past two years. It directly affects the cost of living and can heavily influence voter sentiment. In this election, it became a major theme alongside immigration, especially impacting those in lower income brackets. The frustration with rising prices made voters more receptive to Trump’s messaging and promises.
**Interviewer:** You referenced historical parallels, particularly with Roman Emperor Diocletian’s price controls. What lessons do you think Trump can take away from that era regarding economic management?
**Thomas Philippon:** Diocletian’s price controls ultimately failed, leading to greater instability and a loss of trust in currency. If Trump attempts similar tactics to control inflation through sweeping measures rather than addressing the underlying issues, he could risk repeating history. It’s vital for any leader to understand that quick fixes often lead to more significant challenges down the line.
**Interviewer:** What do you believe are the most pressing economic issues Trump needs to tackle moving forward?
**Thomas Philippon:** The immediate focus must be on restoring confidence in the economy—this includes managing inflation effectively. Additionally, addressing supply chain issues and promoting sustainable growth will be essential. It’s not just about stabilizing prices but creating a robust economy that can withstand future shocks.
**Interviewer:** with the current economic climate, do you foresee any potential challenges for his administration?
**Thomas Philippon:** Absolutely. The challenges are multi-fold. Economic influencers, such as global markets and domestic policies, will test Trump’s leadership. The ongoing inflationary pressures, coupled with political polarization, could make it difficult to implement effective solutions. The next few years will be crucial, and it’s imperative that the administration learns from the past to avoid repeating mistakes.
**Interviewer:** Thank you for your insights, Thomas. It’s clear that the road ahead will be complex and requires careful navigation.
**Thomas Philippon:** Thank you for having me. It’s always important to engage in these discussions as we prepare for the economic future.
