In case there was still any doubt, Davos showed us who Donald Trump really is: a member of the globalist plutocracy. Strip the racism from his nationalist appeal and there is nothing there. It’s camouflage for his service to the global billionaire class from which he comes.
The enthusiastic reception of Trump at the annual World Economic Forum in Switzerland also taught us something about the global capitalist elite. As long as Trump embraces their interests, doesn’t urinate on the podium, and reads a canned speech without rude ad-libs, they praise him as a born-again global statesman.
Globalist capital doesn’t care if you are a thug, a fraud, or an aspiring dictator, as long as you do their bidding. So much for the idea that the market system and liberal democracy are natural complements. They are not.
Democracy has expanded over the past century precisely by keeping private markets in their place, not by going all-in for markets. Trump’s gutting of public-interest regulation, his tax cutting for the 1 percent, and his effort to crush democracy go hand in hand.
The conservative journalist David Frum, a Trump detractor, puts it very well in his new book, Trumpocracy, when he describes the Republicans as “a coalition of the nation’s biggest winners from globalization and its biggest losers. The winners wrote the policy; the losers provided the votes.” You might say the losers, the downtrodden working-class and white nationalist voters who still rabidly support Trump, have been sucker-punched.
But what about Trump’s tariffs on solar panels? Isn’t that a kind of pro-worker nationalism? His retaliation against Chinese panels, which are heavily subsidized in order to drive out U.S. production, have been roundly criticized left, right, and center. Doesn’t that make Trump’s trade policy insurgent and populist?
Not a chance. The orthodox view blasts Trump’s policy as “protectionist.” Maybe someone can explain why it’s protectionist to challenge another country’s protectionism.
Chinese trade in heavily subsidized and sheltered solar panels is not exactly free trade or free-market capitalism. Many conventional free traders and environmentalists alike have criticized the tariffs because in the short run they will raise the cost of solar panels, slowing down the transition to a renewable economy and likely costing some installation jobs.
But without a serious industrial policy to bring back solar production to the U.S., these tariffs are just a symbolic potshot. Trump’s deeper failure, and what makes his economic nationalism phony, is his refusal to connect getting tough on China’s protectionism to a policy to bring back manufacturing to the United States. We can’t stay in the game of technological innovation if we lose the industry, and it’s innovation that keeps lowering costs over time.
Not surprisingly, the rest of Trump’s speech was bland reassurance that he, too, believes in globalization—of the kind that has been leaving most workers behind. The new tax law that he bragged so much about dramatically increases the incentives for moving U.S. jobs offshore. The corporate tax rate was cut to 21 percent. But if a U.S. corporation invests overseas instead, the rate in most cases is just half that—10.5 percent.
Finally, what about Trump’s boast that the economy is performing superbly on his watch—thanks to business confidence and investment, the supposed fruits of deregulation and tax cutting—as proven by the low rate of unemployment and the soaring stock market? This, too, is phony.
The recovery finally kicked in under Obama, driven mainly by very low interest rates. If you take a close look at the GDP growth rate in Trump’s first year, it is almost identical to the growth rate in Obama’s last three years.
The growth rate for 2017, 2.5 percent, was right around the trend line. Growth was 2.4 percent in 2014 and 2.6 percent in 2015, before dipping slightly in 2016. The stronger growth in the first two quarters of 2017, 3.1 and 3.2 percent respectively, could not have been the result of Trump’s policies, because none of them had kicked in yet.
As for the stock market, it too is the result of very low interest rates, further propped up by corporate stock buybacks. When corporations use their profit and tax breaks to buy back stock and pump up share values, it enriches executives (who are partly compensated with stock options) and investors, but does nothing for the real economy, which needs more investment. Nobel laureate Robert Shiller investigated why the U.S. stock market is outperforming others, and attributes much of the difference to corporate stock buybacks.
According to press reports, small investors are now jumping into the stock market for fear of losing out, pumping it up further. They are always the last ones in and the first ones burned when the market turns.
But won’t the booming economy help the Republicans in the 2018 midterm elections? Not likely, either. The problem with trickle-down is that it doesn’t trickle down.
With unemployment down to 4.1 percent, workers are beginning to get (very modest) raises. But nothing has changed the bleak outlook for an entire generation, facing gig work rather than real jobs, lousy low-wage service work, the lowest rate of homeownership for young adults in half a century, and over $1.3 trillion in student debt. Those deep structural changes will not be fixed by low unemployment rates; thus these statistics will not be sufficient to salvage Trump’s presidency.
Over to you, Robert Mueller.