The election of Donald Trump has caused an outpouring of grief and many commentators are convinced that the end of the world is nigh. However, Trump didn’t get us to this place, he was just a savvy opportunist who took full advantage of the economic and foreign policies that both Democrats and Republicans have pursued for the last 40 years.
Supposedly, the US eschews governmental planning in favor of a so-called free market. Of course, every economy is a planned economy, it just depends on who does the planning.
Economist, Michael Hudson, says that Wall Street plans the US economy.
“Under Greenspan and modern economics, a market is “free” from government regulation, free from throwing the bankers in jail when they commit crime, free from any kind of policymaking by government, by labor unions, or by society. So a free market today is a centrally planned economy, but it’s not planned by government. The planning is shifted out of government to the banks.”
Hudson says that US economists, especially the ones that work for the Federal reserve, justify the planning of the economy by Wall Street.
“They’re drawn from these Wall Street institutions. It’s also the financial sector that endows the universities and the business schools. Hardly by surprise, these schools teach that there is no such thing as unearned income, no exploitation. They teach that the financial sector is the most productive sector in the economy, instead of a burden that should be subtracted from GDP, because it’s an overhead that the rest of the economy has to pay.”
What Wall Street wants is the financialization of the US economy. This has resulted in the offshoring of American manufacturing and concomitant loss of jobs by former middle-class workers. The CEO’s of manufacturing corporations can make more money by strip-mining their business, aided and abetted by hedge funds who want to extract as much wealth as possible from the company while putting back as little as possible into production and workers.
Wall Street friendly economists justified this through their policy of shareholder value. Until the late 1970s changes in real wages tracked changes in productivity in the U.S. economy. It was the retain-and-reinvest employment policies of major U.S. corporations that largely accounted for this shared prosperity. Thanks to the theory of shareholder value, pushed by Wall Street friendly economists, “since the late 1970s there has been a widening gap between the growth in productivity and the growth in real wages, caused by a downsize- and-distribute regime in which corporate executives look for opportunities to downsize the labor force and distribute earnings to financial interests.”
In his voluminous writings, Hudson makes the distinction between earned and un-earned income. He points to classical economics, practiced by John Stuart Mills, and Adam Smith, which sought to free up an economy from rent, or financial overhead, so that small businesses could thrive.
The problem is that both Republicans and Democrats favor the powerful financial interests that fund them. They have no interest in creating an economy like the one Hudson describes. Both parties repeat Margaret Thatcher’s maxim–there is no alternative. The Democrats are particularly offensive since they pose as the party of labor. During the recent presidential campaign, Hillary insisted that no change was possible from that of financial neoliberalism— which Adolph Reed has succinctly defined as “capitalism without a labor opposition”.
But the American people know better. Our corporate media cheerleaders have suppressed the fact that economic policies that are considered far to the left by our political elite enjoy popular support among the American people.
For instance, clear majorities of Americans favor breaking up the too big to fail banks, single payer health-care system, free college tuition, and many other “socialist” policies, like the ones put forth by Bernie Sanders during his campaign for president. Sander’s campaign articulated a broad social-democratic program on inequality, regulating Wall Street, health care, education, housing, and jobs and expanded the political discourse to include the categories of class, power, and democratic socialism. It even demonstrated that money was not a definitive barrier to an electoral challenge.
Unfortunately, we’re stuck with Trump, thanks to the DNC, with their single-minded quest to elect Hillary Clinton at all costs, even sabotaging Sanders campaign, as the WikiLeaks files demonstrate.
But, Trump has inherited a mess, with a country hopelessly divided. And, with much of the deep state arrayed against him, he faces opposition to his presidency. If he makes it to the White House he will face an immediate challenge from Federal-Reserve Chair Janet Yellen who recently raised the interest rate, potentially derailing Trump’s economic agenda.
If Trump wants to govern he will absolutely require the ability to plan the US economy, with or despite Wall Street and the other members of the deep state.
Grab some popcorn.
Update: Ian Welsh makes the obvious point–Kleptocracy is neoliberalism’s child, its logical end-result, and Trump is just a new stage in kleptocracy.