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Niall Ferguson is the Milbank Family senior fellow at the Hoover Institution, Stanford.

Edward Lorenz, the pioneer of chaos theory, famously suggested that the flapping of a butterfly’s wings in Brazil could set off a tornado in Texas. Even a tiny disturbance, he argued, can have huge effects in a complex system governed by non-linear relationships.

But since 2016, we’ve seen the opposite. Donald Trump, far from being a butterfly in the Amazonian rain forest, is the 800-lb. gorilla right at the centre of the world. If anyone can cause chaos – in practice as well as in theory – it’s him.

Elected to the most powerful job in the world, he has spent the past two and a half years not just flapping his wings, but wildly swinging his fists, as if intent on starting a global tornado. And yet the consequences of the gorilla’s antics have been remarkable for their smallness. Prophesies of political and financial disaster have proved wrong.

Until now.

In Asia, Hong Kong teeters on the brink of another Tiananmen Square-style massacre. Meanwhile, the North Korean regime is firing rockets like a drunk teenager on the Fourth of July. War over Kashmir looms. And in the Middle East, rumours abound of an imminent showdown between Iran and Israel and its allies.

These political risks coincide with multiple signs of a global economic slowdown. Britain’s economy shrank in the second quarter, but don’t blame Brexit because so did Germany’s, and Italy’s did only slightly better. Trade within the eurozone is down sharply.

Most worrying is the fall in long-term interest rates. Last week the yield on 30-year U.S. government bonds fell below two per cent for the first time. Long-term bond yields are now below short-maturity debt – an inverted yield curve, in the argot of Wall Street. Such an inversion has preceded every U.S. recession since the 1960s. The only people who seem not to have noticed are American consumers, still shopping till they drop, according to the latest retail-sales data.

So is chaos coming to Main Street? Back to Professor Butterfly. It was back in 1972 that Mr. Lorenz gave his famous lecture, “Predictability: Does the Flap of a Butterfly’s Wings in Brazil Set off a Tornado in Texas?”

“Two particular weather situations,” he argued, “differing by as little as the immediate influence of a single butterfly, will generally after sufficient time evolve into two situations differing by as much as the presence of a tornado.”

However, Mr. Lorenz added an important caveat: “If the flap of a butterfly’s wings can be instrumental in generating a tornado, it can equally well be instrumental in preventing a tornado.” In his view, this was what made long-range weather prediction so very difficult.

The same applies even more to economic forecasting. In 1966 the Nobel prize-winning economist Paul Samuelson – like Mr. Lorenz, a professor at the Massachusetts Institute of Technology – joked that declines in U.S. stock prices had correctly predicted nine of the past five American recessions. I know economists with much worse batting averages. They predict a financial crisis every year and once a decade they are right, at which point the media hail the stopped clock as a prophet. Economic forecasters are, in fact, far worse at their jobs than weather forecasters.

Of 469 downturns in national economies since 1988, according to Andrew Brigden of Fathom Consulting, the International Monetary Fund had predicted only four by the spring of the year before they began. As for the great financial crisis of 2008-09, just a handful of economists saw it coming.

That means that we should treat with skepticism those who confidently predict a U.S. recession next year. And, if there is one, we should treat with even more skepticism those who blame it on Trump.

The real point about the gorilla effect, remember, is how little the swinging of the gorilla’s fists has really mattered since he climbed atop the White House. Just like the butterfly, the gorilla may have prevented as many tornadoes as it caused. Indeed, Mr. Trump’s economic policies have almost certainly been, on balance, more conducive to economic growth than the opposite.

“You have no choice but to vote for me,” Mr. Trump declared at a rally in New Hampshire last week, “because [otherwise] your 401(k)s [retirement savings plan] – down the tubes ... So whether you love me or hate me, you’ve gotta vote for me.”

That’s a line that could come back to haunt him if everything goes down the tubes before November next year, when Americans will decide if he’s a one or two-term president. But if Mr. Trump gets lucky, and the economic weathermen are wrong again, the 800-lb. gorilla might get four more years of fist-swinging.

Copyright: Project Syndicate, 2019

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