How did their politics impact their economy?

Economics is concerned with studying and influencing the economy. Politics is the theory and practice of influencing
people through the exercise of power, e.g. governments, elections and political parties. In theory, economics could be
non-political, however in reality it is not so. An ideal economist should ignore any political bias or prejudice to give
neutral, unbiased information and recommendations on how to improve the economic performance of a country.
Elected politicians could then weigh up this economic information and decide. But, in reality, the economy and
finance are always influenced by the political scenario of a country and there is a great impact of political decisions
and powers on the economy.
Many economic issues are seen through the eyes of political beliefs. For example, some people are instinctively more
suspicious of government intervention. Therefore, they prefer economic policies that seek to reduce government
interference in the economy. On the other hand, economists may have a preference for promoting greater equality in
society and be more willing to encourage government intervention to pursue that end. In the case of India as well,
one can witness a lot many cases wherein one may find how deeply the politicians influence the economy and the
way economists think through there policies either for nation development or for vote bank. For example, at the time
of independence of India, the planning commission was formed which drafted the 5-year plan, deciding how the
economy will function. Though this commission was maintained by economists or policymakers, the final power
remained with the PM who was the chairperson of the commission. Till 1992, the thought of a liberal and globalized
economy was not executed. Another such example for politics influencing the economy and economic policies can be
“Demonetization”, which shook the whole economic system of India from in and out. The implication of GST was also
a great example of economic reforms based on political will.
Who runs the economy – Politicians or economists? Another interesting case is the relationship between fiscal policy
(set by the government) and monetary policy (largely set by independent Central Banks). Recently in pandemic
times, we all are witnessing how such decisions are taken where at one-point RBI is working over the supply side by
altering interest rates while the government is working over the demand side by announcing emergency economical
packages.
The question is not only who runs the economy but who influences the economy? It is the ideologies of the politicians
and the political parties that make the actual difference. Like in the case of the USA, The Republican party supports
limited government involvement in economic decisions while The Democratic party relies heavily on the government
to regulate the economy. In economic downturns, Democrats favor deficit spending to revive the economy, whereas
Republicans hope to alter the money supply to revive it. In the case of India too, one can witness how the economic
scenario has changed after NDA formed the government. The policy of improving foreign relations by the prime
minister Narender Modi proved to be a positive turning point for India as it led to an 80% increase in FDI. Schemes
such as Make in India, the idea of Atmanirbhar Bharat are not crafted by economists but have made the economist
think in the direction adopted by the government.
However, there are some areas of economics we could argue are free of politics – basic supply and demand and
concepts like the theory of the firm are not laden with political ideology. But, even in microeconomics, one could
argue that politics can’t help seeping in. For example, privatization is a clear political issue. Who should control key
industries – private enterprise or the government? Another issue with economics is that some criticize the subject for
prioritizing economic growth and maximization of monetary welfare. Some argue that the aim of the society is not to
maximize GDP but to maximize happiness, the environment and being satisfied with what we have. Therefore, a
politician from an environmental background may disagree with the whole premise behind macro-economics. It is not
just about the best way to promote economic growth. But whether we should be aiming for economic growth in the
first place. That is a political issue too. Hence, the economy is one of the biggest political issues.
Were their economic policies effective?
The United States has maintained economic policies that have effectively promoted international
competitiveness and economic growth. Compared with other developed democracies, the United States
has generally featured low tax rates, less regulation, lower levels of unionization and greater openness
to foreign trade. The country has enjoyed superior levels of growth, capital formation and
competitiveness. The strong economic growth established during the Obama administration continued
through Trump’s first three years. During Trump’s first two years in office, Congress passed a major tax
reform which included a tax cut for corporations and high-income individuals. Along with increases in
defense spending and Trump’s rejection of spending cuts for middle-class social benefits (Medicare and
Social Security), the tax cut created a sharp increase in the already unsustainable long-term budget
deficit. As of late 2019, the tax cuts were responsible for a roughly $500 billion increase in the annual
federal budget deficit, which totaled more than $1 trillion. During 2018, as the Federal Reserve (also
known as “the Fed”) began to raise interest rates, Trump repeatedly questioned the Fed’s expertise and
accused it of doing harm to the economy – which he felt undermined his political interests. And though
he lacked the legal authority to do so, he threatened in 2019 to fire the Fed’s chairman. Both Congress
and financial markets ignored the apparent threat to the Fed’s independence. The Fed lowered interest
rates during 2019, accounting for signs of slowdown in the world economy. Holding firm to his campaign
claims that the United States has been treated unfairly in most of its trading relationships, Trump
repeatedly attacked various foreign trade agreements throughout his first two years in office. This
included the United States pulling out of the Trans-Pacific Partnership trade agreement. Trump also
demanded that revisions be made to the North American Free-Trade Agreement with Canada and
Mexico, after imposing major increases in tariffs affecting both countries. He has provoked a trade war
with China, imposing major tariffs that China met with firm retaliatory measures, along with lesser
conflicts with the European Union and Japan. In 2019, a new North American trade deal passed the
House, and Trump announced a new trade deal with China. The Trump administration initiated massive
subsidies to assist agricultural businesses severely hurt by the loss of exports to China.

Citations: Jeff Stein, Trump’s quest to shatter GOP economics reached its culmination in 2019,
Washington Post, Dec. 27, 2019.

What disadvantages can politics bring to a country's economy?

The more political problems their are, the slower the economy progress will be. Not all forms of political
stability are equally beneficial to growth, a lot depends on how well stability translates into effective
governance.