“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.