Trump’s Economy Is On A Path To A Bust


Whose interests are being promoted by macroeconomic policies in the United States? Is Donald Trump good for the economy? Is he responsible for the current economic indicators, which seem to be healthy? Are his tariff policies good for workers here and abroad? And how does his approach to economics differ from Obamas?

Howard Sherman is Emeritus Professor of Economics at the University of California at Riverside, a founding member of the Union for Radical Political Economics and author of Inequality, Boom, and Bust: From Billionaire Capitalism to Equality and Full Employment and Principles of Macroeconomics: Activist vs Austerity Policies (co-authored with Michael Meeropol, and now in its second edition). In an exclusive interview for Truthout, Sherman provides answers to these questions and exposes the myths associated with the “success story” of Trumps economy. In fact, Sherman contends that the US economy is on the verge of an economic recession and possibly a Great Depression.

C. J. Polychroniou: Howard, what are the goals and aims of macroeconomic policy in the US, and what interests are they designed to protect and promote?

Howard Sherman: There are two different views in the US over macroeconomic policy. One is the conservative view, which says that capitalism is the best possible economic system, so it needs no reforms, or just a few minor ones. Capitalism functions smoothly and there is a recession only when there is an incorrect government policy. Furthermore, there is never too much inequality because inequality merely reflects the productivity of an individual, so no reform is needed to change inequality.

The second view is the progressive economics view, held by a minority. In general, progressives believe that inequality represents extremely high profits made by corporations that exploit the labor of workers at low wages. Inequality increases with every capitalist expansion, meaning that there is an increase in the ratio of all profits to all wages. Moreover, this increase in inequality means that the demand for goods and services by workers, based on their wages and salary, is limited. As such, the rising supply of goods to the market far outdistances the demand for these goods by the entire working population. The result is an economic recession or a depression that produces heavy unemployment in every downturn business cycle.

The conservative view that capitalism is near perfect helps to prevent reforms of the system, so it makes the wealthy owners very happy. On the other hand, the progressive policy that is necessary to raise wages and salary reflects the views of the great majority of the working population. Read more

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The Resurgence Of Political Authoritarianism: An Interview With Noam Chomsky


Noam Chomsky

Following the end of World War II, liberal democracy began to flourish in most countries in the Western world, and its institutions and values were aspired to by movements and individuals under authoritarian and oppressive regimes. However, with the rise of neoliberalism, both the institutions and the values of modern democracy came rapidly and continuously under attack in an effort to extend the profit-maximizing logic and practices of capitalism throughout all aspects of economic and social life.

Sketched out in broad outlines, this story explains the resurgence of authoritarian political trends in today’s Western societies, including the rise of far-right movements whose followers feel threatened by the processes unleashed by neoliberal economic policies. In the former communist countries and in the non-Western world, meanwhile, authoritarianism is also on the rise, partly as a residue of authoritarian legacies, and partly as a reaction to perceived threats posed to national culture and social order by global capitalism.

Is it possible to counter this rise in extreme populism? In this exclusive Truthout interview, the world-renowned linguist and public intellectual Noam Chomsky — the author of more than 100 books and thousands of academic articles and popular essays — offers his unique insights on this and more, bringing into the analysis issues and questions that are rarely addressed in the current debates taking place today about the resurgence of political authoritarianism.

C.J. Polychroniou: In 1992, Francis Fukuyama published an intellectually embarrassing book titled The End of History and the Last Man, in which he prophesied the “end of history” after the collapse of the communist bloc, arguing that liberal democracy would become the world’s “final form of human government.” However, what has happened in this decade in particular is that the institutions and values of liberal democracy have come under attack by scores of authoritarian leaders all over the world, and extreme nationalism, xenophobia and “soft fascist” tendencies have begun reshaping the political landscape in Europe and the United States. How do you explain the resurgence of political authoritarianism in the early part of the 21st century?

Noam Chomsky: The “political landscape” is indeed ominous. While today’s political and social circumstances are much less dire, still they do call to mind Antonio Gramsci’s warning from Mussolini’s prison cells about the severe crisis of his day, which “consists precisely in the fact that the old is dying and the new cannot be born [and] in this interregnum a great variety of morbid symptoms appear.”

One morbid symptom is the resurgence of political authoritarianism, a highly important matter that is properly receiving a great deal of attention in public debate. But “a great deal of public attention” should always be a warning sign: Does the shaping of the issues reflect power interests, which are diverting attention from what may be more significant factors behind the general concerns? In the present case, I think that is so, and before turning to the very significant question of the resurgence of political authoritarianism, I’d like to bring up related matters that do not seem to me to receive the attention they merit, and in fact are almost totally excluded from the extensive public attention.

It’s entirely true that “the institutions and values of liberal democracy are under attack” to an unusual extent, but not only by authoritarian leaders, and not for the first time. I presume all would agree that primary among the values of liberal democracy is that governments should be responsive to voters. If that is not the case, “liberal democracy” is a farce. Read more

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Towards A Progressive Political Economy In The Aftermath Of Neoliberalism’s “Creative Destruction”


CJ Polychroniou

Abstract
The article argues that, after 45 years of ‘neoliberal destruction’, the time is ripe for moving forward with the adoption of a new set of progressive economic policies (beyond those usually associated with classical Keynesianism) that will reshape advanced societies and the global economy on the whole by bringing back the social state, doing away with the predatory and parasitic practices of financial capital, and charting a course of sustainable development through a regulatory regime for the protection of the environment while promoting full employment, workers’ participation in the production process, and non-market values across a wide range of human services, including health and education.

Policy recommendations
• Capitalism is an inherently unstable socioeconomic system with a natural tendency toward crises, and thus must be regulated; especially the financial sector, which constitutes the most dynamic and potentially destructive aspect of capital accumulation.
• Banks, as critical entities of the financial sector of the economy, are in essence social institutions and their main role or function should be to accept deposits by the public and issue loans. When banks and other financial institutions fail, they should be nationalized without any hesitation and all attempts to socialize losses should be immediately seen for what they are: unethical and undemocratic undertakings brought about by tight-knit linkages between governments and private interests. In periods of crisis, the recapitalization of banks with public funds must be accompanied by the state’s participation in banks’ equity capital.
• Markets are socially designed institutions, and as such, the idea of the “free market” represents one of the most pervasive and dangerous myths of contemporary capitalism. From antiquity to the present, trade was based on contracts and agreement between government authorities and was spread through the direct intervention of the state. Human societies without markets cannot thrive. However, markets often function inefficiently (they create oligopolies, give rise to undesirable incentives and cause externalities), and they cannot produce public goods in sufficiently large quantities to satisfy societal needs. Therefore, state intervention into markets is both a social need and a necessary moral obligation.
• The economic sphere does not represent an opposite pole from the social sphere. The aim of the economy is to improve the human condition, a principle that mandates that the process of wealth creation in any given society should not be purely for private gain but, first and foremost, for the support and enhancement of economic infrastructure and social institutions for further economic and social development; with the ultimate goal being the attainment of a decent standard of living for all citizens. Free education and health care should be accessible to everyone, along with the right to a job. Indeed, full employment (See Pollin, 2012) must become a key pillar of a progressive economic policy in the 21st century.
• Workplaces with a human-centered design must replace the current authoritarian trends embodied in most capitalist enterprises, and participatory economics (social ownership, self-managing workers, etc.,) should be highly encouraged and supported.
• The improvement of the quality of the environment (with key priorities being the protection and preservation of ecosystems in oceans and seas and the protection of forests and natural wealth, in combination with policies seeking to address the phenomenon of climate change) ought to be a strategic aim of a progressive economic policy, realizing that the urgency of environmental issues concerns, in the final analysis, the very survival of our own species. Read more

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Goodbye Regulations, Hello Impending Global Financial Crisis


Prof.dr. Gerald Epstein

Ten years after the last financial crisis, Republicans — with backing from many Democrats — have made sure that Wall Street can return to its old ways of doing business by repealing the Dodd-Frank Act, which acted up to now as a very mild regulatory regime to rein in the predatory nature of financial capital. The decision to repeal Dodd-Frank was justified on the grounds that it put a break on economic growth. Gerald Epstein, professor of economics and co-director of the Political Economy Research Institute at the University of Massachusetts at Amherst, argues that this is not true at all. In this exclusive Truthout interview, Epstein notes that it is now very likely that the “toxic, speculative activities” of the Wall Street crowd will return with a menace, thereby preparing the groundwork for the next global financial crisis.

C.J. Polychroniou: Following the financial crisis of 2008, a bill was passed in 2010 under the Obama administration that sought to contain risks in the US financial system. The bill, which was sponsored by US Sen. Christopher Dodd and US Rep. Barney Frank, was rather weak as a regulatory regime. Nonetheless, it was severely criticized by conservatives. Donald Trump delivered a mixed message in running for president, railing against the big banks and Hillary Clinton’s connections to Wall Street, while at the same time promising more deregulation. Now, Congress has passed and President Trump has signed into law a comprehensive financial deregulation law, “The Economic Growth, Regulatory Relief, and Consumer Protection Act.” In addition, Trump-appointed financial regulatory agencies such as the Securities and Exchange Commission (SEC) have implemented policies to loosen regulations further on a variety of financial institutions and activities. The backers of rolling back Dodd-Frank have claimed that financial deregulation will increase economic growth and provide more credit to households and business. First, what were the weaknesses of the Dodd-Frank Act, and did it actually contribute to anemic economic growth, as its Republican critics like Paul Ryan and others are arguing?

Gerald Epstein: The main weakness of the Dodd-Frank Act is that it did not break up the “too big to fail” financial institutions. As a result, these large financial institutions retained the power to blackmail the public to bail them out the next time there is a financial meltdown and, as we have seen since Trump was elected, to buy off enough politicians to roll back the weak financial regulations that were passed. More generally, Dodd-Frank had way too many loopholes that resulted from financial sector lobbying so that it could never be implemented in its strongest form.

No, Dodd-Frank did not contribute to anemic growth. There is no evidence of this. Anemic growth was largely due to the legacy of the financial crisis itself, in which a great deal of household wealth was decimated, and to the continuing austerity policies that the Republicans were able to force on a weak-kneed and Wall Street-bedazzled Obama administration. On top of these factors are the long-term structural problems of the US economy related to the high level of inequality — itself largely due to the oversized power of Wall Street — and to the widespread disinvestment of US multinational corporations from the US economy, among other factors. If anything, Dodd-Frank worked against some of these tendencies, and thereby helped to sustain the long economic recovery that the Trump administration is now benefiting politically from. Read more

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EU’s Debt Deal Is “Kiss of Death” For Greece


After eight long and extremely painful years of austerity due to gigantic rescue packages that were accompanied by brutal neoliberal measures, in Athens, the “leftist” government of Alexis Tsipras has announced that the era of austerity is now over thanks to the conclusion of a debt agreement with European creditors.

In the early hours of June 22, a so-called “historic” deal on debt relief was reached at a meeting of Eurozone finance ministers after it was assessed that Greece had successfully completed its European Stability Mechanism program, and that there was no need for a follow-up program.

The idea that Greece’s bailout programs can be considered a success adds a new twist to the government’s Orwellian doublespeak, given the fact that the country has experienced the biggest economic crisis in postwar Europe, with its gross domestic product (GDP) having shrunk by about a quarter, and reporting the highest unemployment rate (currently standing at 20.1 percent) of all European Union (EU) states.

On top of that, the ratio of the country’s public debt to gross GDP has risen from 127 percent in 2009 to about 180 percent, a development which has essentially turned Greece into a debt colony, leading to pressing demands that all valuable public assets be sold — including airports, railways, ports, sewerage systems, and gas and energy resources. Indeed, since the start of the bailout programs, Greek governments have been trying hard to outdo one another on the privatization front in order to satisfy the demands of the official creditors, the EU and the International Monetary Fund (IMF). Still, the current pseudo-leftist Syriza government has proven to be the most servile of Greek governments to creditors.

Arguments for privatization aside, the deadly combination of higher debt and declining GDP had most economists convinced quite early on that austerity was killing Greece’s economy, and that a debt write-off would be at some point absolutely necessary for medium- and long-term recovery. However, Germany and its northern European allies had diametrically opposed this idea, insisting on even stronger doses of austerity, while balking at the prospect of a debt write-off. Read more

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The Anatomy Of Trumpocracy: An Interview With Noam Chomsky


Noam Chomsky

With its spate of right-wing rulings this week, the Supreme Court has paved the way for Donald Trump and the Republican-dominated Congress to intensify their attacks on human rights, workers and the country’s democratic institutions, dragging the US deeper into the abyss.

US political culture has long been dominated by oligarchical corporate and financial interests, militarism and jingoism, but the current Trumpocracy represents a new level of neoliberal cruelty. Indeed, the United States is turning into a pariah nation, a unique position among Western states in the second decade of the 21st century.

What factors and the forces produced this radical and dangerous shift? How did Trump manage to bring the Republican Party under his total control? Is Trumpocracy a temporary phenomenon, or the future of American politics? Is the Bernie Sanders phenomenon over? In the exclusive Truthout interview below, world-renowned scholar and public intellectual Noam Chomsky, Emeritus Professor of Linguistics at MIT and currently Laureate Professor of Linguistics at the University of Arizona, tackles these questions and offers his unique insights.

C.J. Polychroniou: Noam, while many in the country and the world at large watch aghast as Donald Trump’s nightmare of white supremacy continues to unravel the United States, it still remains something of a puzzle as to what propelled Trumpism to political prominence. For starters, why did voters turn to Trump? Who are the people that make up his hard-core base, and how do we explain the fact that he has essentially taken over the Republican Party without any serious opposition?

Noam Chomsky: Part of the solution to the puzzle is Obama’s performance in office. Many were seduced by the rhetoric of “hope” and “change,” and deeply disillusioned by the very early discovery that the words had little substance. I don’t usually agree with Sarah Palin, but she had a point when she ridiculed this hopey-changey stuff. A fair number of Obama voters, mostly working people, switched to Trump. These developments were already clear by the time of the 2010 special election in Massachusetts to fill the seat of Senator Kennedy – the liberal lion. Virtually unknown Scott Brown won the election, the first Republican elected to the Senate in [more than] 40 years in this liberal state. Analysis of the vote showed that even union members hardly supported his liberal opponent because of anger at Obama: the way he handled the housing-financial crisis (bailing out the rich, including the perpetrators, while letting their victims hang out to dry) and much else, including provisions of his health care proposal that working people saw, with justice, as an attack on health programs that they had won in contract negotiations. Read more

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