Trumponomics Part 3: Alternatives

TrumponomicsHere is Part 3 of my series on the book Trumponomics – Causes and Consequences. As it is an early assessment of the economics of the Trump presidency, concrete left policy alternatives do not take up much of the content, but there are some ideas to draw on.

Central to the aim of making the left ‘great again’, to quote one of the authors, is a political programme which pivots away from the dominant liberal, politically correct agenda, and which serves the interests of the masses.

This would be a social democratic platform, offering a radical alternative to the neoliberal ideology which has captured both major parties in the US. Bernie Sanders, despite failing to win the Democratic nomination, gave many a taste of what could be achieved.

Sanders styled himself a ‘socialist’, but by the standards of Europe, his policy proposals were far more social democratic. He certainly was not calling for the revolutionary overthrow of capitalism, but merely a larger role for government in the economy.

Social democracy and support for the mixed economy represented the consensus across much of the West during the post-war period, until the 1970s when the New Right began its assent.

Since then, the obsession with downsizing government, seemingly at whatever cost, has left the US with decaying infrastructure, high levels of inequality and poverty and an increasingly dysfunctional politics which prevents the ruling elites from offering the necessary solutions.

One chapter in the book outlines an alternative social democratic programme, which would need to be carried out by a ruling party not captured by Wall Street and the ideology of neoliberalism: a private debt write-down, major infrastructure spending, public healthcare, the strengthening of trade union rights and improved environmental regulations.

Another draws attention to the rising profits which firms have failed to reinvest, and have instead use for stock buybacks to boost their share price and CEO compensation. Since it is productive investment which drives growth in output and productivity and is the key to rising living standards, this represents a serious problem.

Some on the right might argue that if firms haven’t invested, then there can’t be any profitable opportunities available. This leads to calls for deregulation and tax cuts in order to incentivise the ‘wealth’ and ‘job creators’. It tends to conflate the already wealthy with entrepreneurs, but it also ignores the major role played by government in positively shaping the business environment with the sorts of policies proposed above: effective public action can ‘crowd in’ private investment opportunities.

Public research and development has also led the way in the creation of new technologies, which have subsequently been taken up by the private sector and produced for profit: the elements behind the smart phone are one example: the internet, GPS and the touchscreen were all publicly funded before they were combined in consumer technologies. These ideas are simply ignored by the right.

Further to the left, some Marxist economists, such as Michael Roberts, who is not a contributor to the book, but whose blog is often interesting reading, lay the blame for the Great Recession and the subsequent weak recovery on too low a level of private sector profitability. A strong recovery requires a significant revival in the rate of profit, which in turn requires the devaluation of business costs to restore it to some higher level.

I have some sympathy with this view, but I think it neglects the role of the state in a mixed economy as already described. It does offer an explanation for the role of austerity in reducing business costs and raising profitability but in my view the desire to replace the system with socialism leads to a neglect of potential state action to improve the business climate in more positive ways than simply the imposition of austerity and deregulation.

Changes to corporate governance have also been proposed by economists who want to see a shift from the dominance of shareholder value to the so-called stakeholder model, which encourages firms to pay more attention to the interests of employees, suppliers and consumers and not simply their short-term share price.

The rise of Trump has certainly led to a reaction against the man and his policies. He was elected, at least in part, to ‘protect’ the public against what are seen by many as the failures of the elite and an instability blamed on globalization. So far, his presidency has proven to be something of a struggle, and US politics remains bitterly divided. It may be that his policies in fact harm his supporters.

If the left are to turn things around, they need to draw on the successes of the Sanders campaign and remake the case for effective government action in the creation of a widely shared prosperity. He showed that it is possible to run without the backing of Wall Street and the business elite.

It seems that only mass popular support from below will be sufficient to transform US politics in a progressive direction. Trump’s wrecking crew will likely only deepen division, lead to higher inequality, poverty and insecurity and undermine domestic and global institutions.

Of course, it is quite possible that Trump will galvanize huge opposition and open the way for the defeat of the regressive right. Nevertheless, they will do all they can to entrench their handle on power, as they have shown in recent decades. Much of the Democratic left seems to lack the zeal of the right, who have shaped a destructive ‘winner-takes-all’ system, both economically and politically.

This will make it a hard slog to restore shared prosperity, but we live in interesting times, and political change can come suddenly if sufficient numbers are motivated to make things happen. In the US, the movement to bring progressive change must come from below.

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