Michael Hudson interview part 2

Following Tuesday’s video, here is more from this interview with Michael Hudson on Trump’s economic policies, from tax cuts and trade wars to infrastructure, privatisation, industrial policy, Wall Street versus Main Street and Artificial Intelligence and its effects on unemployment.

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Trumponomics and investment

“The weakness of private business investment in most developed countries through the neoliberal era is difficult to explain on the basis of a standard regression equation. Most of the usual determinants of investment – including profitability, interest rates, and tax and regulatory policies – were aligned in a direction that should have elicited more private investment effort. But the neoliberal recipe delivered less investment, not more. And the failure of accumulated wealth to trickle down creates major economic and political problems for the system and its elites.

For all of Donald Trump’s claims of being an “outsider”, changing the traditional rules of politics and policy, his economic program is absolutely consistent with the general direction of the trickle-down, neoliberal policies that have already governed the US for almost four decades. Trump will further shift the distribution of income upward to corporations and those who own them. His policies will suppress the incomes and the consumption of workers – including cutting their public services. His regulatory and fiscal priorities will favour investment in expensive, capital-intensive sectors (like energy and defense) that support relatively few jobs, while imposing enormous costs on broader society and the planet. His financial and monetary policies will continue to privilege financial wealth and speculation over real investment and production, undoing even the baby steps taken to rein in finance after the conflagration of 2008. The core logic of his approach is transparent: enhance the wealth and power of business and the wealthy, and they will invest more in America, and everyone will prosper. There is very little novel content in Trump’s incarnation of trickle-down policy, and very little reason to believe that it will succeed in revitalizing business investment activity that has chronically disappointed. Outside of bursts of new activity in a couple of targeted sectors (like energy and military industries), there is no reason to expect that the trajectory of US business investment will improve in any sustained fashion under Trump’s guidance. Certainly his program cannot recreate the virtuous combination of driving factors that powered the long postwar boom in US capital accumulation: near-full employment, a growing public sector, and strong productivity growth, all of which (for a while) reinforced the vitality of private investment.

Even if the Trump program did succeed in motivating a generalized resurgence in US private business investment, of course, Americans (and others around the world) would have to ask themselves, “At what cost?” A temporary burst in investment in fossil fuel extraction and consumption, achieved by abandoning environmental regulations that were already too weak, is of dubious value when the costs of fossil fuel use are becoming intolerable. Similar questions could be asked about the general strategy of reinforcing profit margins through the suppression of wages and other socially destructive levers, in a country which already experiences more poverty and inequality than any other industrial nation. Business investment is never an end in its own right; it is socially beneficial only to the extent that it underpins job creation, incomes, productivity, and ultimate improvements in living standards. Trying to elicit a bit more investment effort by suppressing living standards a little further, is self-defeating to the ultimate purpose of economic development.

Investment in the US, and other advanced industrial countries, is held back by more fundamental problems than corporate tax design or environmental regulations. The fundamental vitality of the profit motive in eliciting accumulation, so celebrated in the early chapters of capitalist history, seems to have dissipated. The owners of businesses are content to consume their wealth, or hoard it, or speculate with it, instead of recycling it via new investments. Ever-more desperate attempts to elicit a bit more investment effort never seem to alter this stagnationist trajectory – with the incredible result today that overall production is actually becoming less capital-intensive, despite “miraculous” technological innovations. Trump is giving the trickle-down theory one more kick at the can, having successfully capitalized on popular discontent with the failures of previous attempts. Progressives must work harder to illuminate the failure of this business-led economic logic, and come up with other visions for financing capital investment, innovation and job-creation that do not depend on fruitlessly bribing the investing class to actually do the job it is supposed to.”

Jim Stanford (2017), US private capital accumulation and Trump’s economic program, in Trumponomics: Causes and Consequences, World Economic Association: College Publications, p.135-7.

The complete original article can be accessed for free here.

Economics is for everyone

“…[I]t is tempting to leave economics to the experts, particularly as this is part of the dominant political culture of the twentieth century, but in this case we cannot afford to. We are being sold short because the very knowledge and skills we need to address the great challenges humanity faces in the twenty-first century have been systematically left out of the education of those who go on to run our economy…as a society this binds us in a mental straightjacket that prevents us imagining the economy in any other way. This is turn precludes any real discussions about what our collective values are, how we wish to organise the economy and how we should address the challenges we face. We must reform economics so that the next generation of economic experts have the skills needed to reinvigorate economics and to build a society in which economics is a dialogue people actively take part in.

The aim…is to create spaces in which we can individually and collectively begin to rethink economics. In time we hope these spaces will become concrete institutions which enable mass participation in economic decision making. Ultimately we believe that economics must become a public dialogue and never again be left only to the experts.”

Joe Earle, Cahal Moran and Zach Ward-Perkins (2017), The Econocracy: The perils of leaving economics to the experts, p.169-170

Friedrich Hayek – a brief intro

Following videos on Marx, Keynes, Adam Smith and Capitalism, and in the interests of some kind of balance, here is a brief video introduction from The School of Life on Austrian School economist Friedrich Hayek. His thinking influenced the political programmes of Reagan and Thatcher in the 1980s and, many years before, he was involved in some great intellectual debates with Keynes.

I found the video useful, as I have not read any of Hayek’s work, though I have read other writer’s critiques of him. One of the points in the video that stood out for me was Keynes’ questioning of Hayek as to where the line should be drawn between government intervention and the private sector, given the inevitability of some state planning. Of course, private firms make plans as much as governments, but the balance between the public and private will surely vary over time in any country depending on a range of factors.

I would also make the point that Thatcherism has been described by one academic as ‘the free economy and the strong state’. If this is an accurate characterisation, it illustrates the inevitable and shifting relationship between the market and the state, and a range of other institutions. Like it or not, modern capitalist economies are all mixed economies with interventionist states. There will always be room for debate over the balance between the various and evolving institutions that comprise such a system.

Michael Pettis on rising trade tensions

With Donald Trump’s apparently escalating trade war very much in the news, here are some wise words from Peking University’s Michael Pettis, taken from the final pages of his 2013 book The Great Rebalancing – Trade, Conflict, and the Perilous Road Ahead for the World Economy (p.192-194). They seem particularly relevant right now.
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