Home > Uncategorized > Trump is repeating exactly the same script that has guided neoliberal policy for over three decades.

Trump is repeating exactly the same script that has guided neoliberal policy for over three decades.

from Jim Stanford

However it is explained in economic theory, the fundamentally productive, entrepreneurial role of capitalist investment is essential to the political and social legitimacy of the elites who lead the system – and who own and profit from the bulk of its wealth. Indeed, the thriftiness of the early capitalists, and their willingness to plough their savings back into growth, accumulation, and innovation, is precisely what endeared this dynamic new class to the classical economists. Smith, Ricardo, and their colleagues celebrated the productive leadership of capitalists, and developed policy recommendations which consistently favoured that class accordingly: everything from tariff reduction on imported food (to reduce real wage bills) to the expansive enshrinement of property rights. Anything that granted more money and certainty to productive, ambitious investors would be good for the economy, and the rest of society would benefit accordingly. That core idea (albeit perverted by the analytical twists and inconsistencies of neoclassical theory) lives on in the “trickle-down” policy vision which defined neoliberalism from the outset. Neoliberalism was a response to the deceleration of private accumulation after the long postwar boom. That slowdown was due in part to constraints on business imposed by workers, governments, and liberation movements in the former colonies.  

The goal of neoliberalism was to restore the all-round power and legitimacy of private business; to free companies from the inconveniences of intrusive regulations, pushy unions, and taxes; and to pro-actively create and expand new investment opportunities (through globalization, privatization, and market-creation). The social hardship associated with these policies was always justified on grounds that they would unleash the dynamic impulses of accumulation, to the benefit of workers and others who depend on business investment to play this productive, leading role.

Neoliberalism certainly succeeded in strengthening profit conditions, which have improved substantially in the U.S. and most other developed economies since the 1980s. But the second part of the equation – a restoration of capital accumulation as the driving force of growth and prosperity, with widespread benefits that spread through the rest of society – was never realized. Perhaps it was never actually part of the plan: it can be argued convincingly that neoliberalism has been more interested in re-dividing the pie than growing it, and more interested in controlling growth than unleashing it. But the continued sluggishness of real accumulation (and hence of GDP, employment, and incomes) is a glaring problem for neoliberal legitimacy. Profits have been restored, incomes are flowing more strongly to corporations and their owners, but business investment has weakened under neoliberalism, not strengthened. Measured as a share of GDP, net fixed capital investment in OECD countries (after deprecation) has declined from an average of 12 percent in the 1970s, to just 4 percent since 2010.[1] The U.S. experience has been even worse (as documented below). Years of stagnation and austerity since the global financial crisis have exacerbated the problem, politically as well as economically. The contrast between fat bonuses, strong profits, and luxury consumption at the top, and the continued stagnation of work and living standards for most of society, must inevitably provoke a crisis of legitimacy. After all, it is supposed to be their willingness and capacity to plough economic surplus back into accumulation and innovation that is the raison d’être of the capitalist class, and the core engine that drives the system forward. If the wealthy are capturing a larger surplus than ever, but consuming or wasting it rather than reinvesting it,[2] the political stability of the system, in addition to its economic vitality, will be threatened. As Ruccio (2017) puts it succinctly, “The machine is broken.”

This makes it all the more ironic that the politician who most successfully mobilized the anger and alienation of the workers and communities who have suffered from stagnation, now promises to repair the top-down logic of the system with more of the same, painful medicine. Donald Trump has certainly placed the failure of business investment at the center of his policy program. Proposals for facilitating, encouraging, and even browbeating business to invest more in America constitute a running and consistent theme throughout his plan. But his ideas for “making America great again” through restored business leadership and investment are not novel at all: he is repeating exactly the same script that has guided neoliberal policy for over three decades – and which has manifestly failed to revitalize private capital investment. Trump’s proposals may elicit spurts of new business activity in certain sectors of the U.S. economy – led by petroleum companies taking advantage of his aggressive deregulation of environmental protections, and military contractors lining up for a share of coming defense spending. But that will not restore the general vibrancy of private capital accumulation, growth, and employment on any sustained basis. Trump’s program, like other incarnations of trickle-down policy, does not tackle the deeper structural problems which explain the continuing slowdown in business activity, despite enhanced business power and profitability.

[1] Author’s calculations from OECD National Accounts Statistics; unweighted average.

[2] My estimations suggest that less than one-tenth of the surplus generated in the U.S. economy is reinvested in new capital accumulation; most of the rest is consumed. See Stanford (2015), p.78.

U.S. private capital accumulation and Trump’s economic program

  1. April 26, 2017 at 12:22 am

    The key to understanding the lack of growth in the productive economy, in spite of massive infusion of funds into the general economy, lies in the growth of the financial sector: Funds are drawn into speculative activities that only benefit the casino players, at the exclusion of people who can contribute to real wealth.
    The massive profits realized by large banks in the midst of general lack of activity in the productive sector of the economy, fully supports the above statement.

    George Orwell (Eric Blair) got it right in his novel “Animal Farm” where the pigs who took over the management of the farm spent most of their time playing poker in the kitchen while the farm went to rack and ruin.

  2. April 27, 2017 at 9:07 am

    I called that globalization is coming home”, right after Trumps inauguration. I dont think Trump offered any surprises, but exactly what we could expect. Neoliberalism in its most brutal form, just as it was invented in Chile, will be Trumps plan to make “America great again”. Hitting hard on dissent, labor representation, wages, environmental protection and democracy is Trumps economic policy.

    Recently it also became public, that all his plans about investing into infrastructure in the US well be carried out as “Public Private Patrnership”, translating into a rain on public wealth by the billionair class. From an outsider perspective, I cant stop myself from feeiling that there is some kind of justice to that. US citizens will now see how neoliberalism felt like for most of the rest of the world for 50 Yesrs.

    • April 27, 2017 at 9:10 am

      There is a bad typo there, it shoul read “a raid on public wealth by the billionair class

  3. April 28, 2017 at 8:47 am

    Why does neoliberalism even exist? Is it necessary? The ending of the Middle Ages saw the overthrow of monarchy by democracy right along with the invention of the business firm. Liberalism was the set of ideas that explained and defended both these changes. Liberalism attempts to legitimize the thriftiness of capitalists, and their willingness to plow their savings back into growth, accumulation, and innovation. To normalize and routinize these ideas and actions. At the same time liberalism attempts to explain and defend the absolute right of every citizen to take part in choosing their leaders through voting and legislatures. And for leader chosen thus to make all policies for a nation. This partnership was effective to a greater or lesser degree. Until after WWII. It broke down when the business class changed. Financialization was part of it, as was the explosion in opportunities to create wealth and the level of potential wealth. The world became a giant banquet with virtually no limit on how much a firm could eat. The good business sense of caution and conservatism in pursuing opportunities and putting profits back into the business to protect it and ensure its future was no longer necessary. There was no history, no tradition, no principles to justify such changes, apart from those of piracy and the most brutal of warlords. So, some smart philosophers-for-hire (and others) invented principles, traditions, and a history. They called it neoliberalism. It was a hodgepodge of things that did not fit together well and constantly contradicted itself. But it was an umbrella under which the new masters of business and money could claim legitimacy and hide their sins. In the words of the old spiritual, when you dance with the devil, you don’t change the devil, the devil changes you. Capitalism was never a stable foundation for economic life, but neoliberalism transformed it into brutal piracy ineffectual in meeting human needs or supporting a democratic society. And that’s where we stand today. We need another Renaissance and Enlightenment to reset our civilizations in all areas, including economic.

    • robert locke
      April 28, 2017 at 11:55 am

      You’ve got it right. Conservativism in the era of the French revolution was to a great extent about moral order, no society could function without one. That was the great point of monarchist conservatives in France and in Britain, the Enlightenment sapped the institutions, e.g., the monarchy itself, the Church, which were essential to the maintenance of moral order. The excesses of the Revolution confirmed the fall. Republicans were attacked for demoralization, the Monarchist under the Third Republic pictured it in cartoons as “the slut.” a corrupt whore exploited by greedy and corrupt politicians and financier. It is just as well that neoliberals do not call themselves conservatives, Their views have nothing in common with
      Burke, de Bonald, Chateaubriand, Le Play, Benoist d’Azy, and other conservative thinkers. Nothing to do, moreover, with traditional liberalism, as you point out. But a lot to do with people who turned the American Republic a la Third Republican France into a slut

      • April 30, 2017 at 9:33 am

        Genuine conservatism and democracy can coexist. Democratic decisions need only be made within the history and tradition (culture) of the society. In other words, democracy should never be allowed to destroy culture which gave it life. As is happening now with Donald Trump’s presidency. On the other hand, neoliberalism and democracy cannot coexist. Both claim the position of “total” institutions (the source of all elements of life within a society). They’re deadly competitors from the outset. Culture (civic society, morality, historical tradition) is the only real “total” institution. Neoliberals will not accept this. Democrats will so long as democracy is not pushed aside.

      • robert locke
        April 30, 2017 at 11:46 am

        You are such an intelligent man, Ken, not only because most of what you say I think is good interpretation. Why is it, therefore, that so few do not agree with or ignore our arguments. I don’t want to believe that most Americans are ignorant self-servers. I would rather believe that good government in successful communities promotes common wealth. Democracy promotes good government, so we have to look for political solutions, not economic, or as you say, government and agricultural economies came into existence together. If we want good economies we need good politics.

      • May 1, 2017 at 10:34 am

        Robert, humans are created. There is no inherent humanity except for two things. Relationships and imagination. Humans exist in and are created by relationships. Those relationships depend on the one unique aspect of humans, imagination. These together allowed homo Sapiens to survive when their fellow humans died off. But there is a down side here as well. Humans can be channeled through relationships and strong images (imaginings). Lots of relationships show this pattern. Orphans make the best black operatives, Isis recruits show a lack of strong relationships, abandoned people want strong and vivid relationships. Governments use these techniques. Corporations use them. Advertisers use them. The UN uses them. And, unfortunately so do the Ku Klux Klan, the American Nazi party, the alt-right, and just about every militia group in the US. Americans are not ignorant self-servers but they are human and depending on the history of their relationships can be moved to violent and sometimes delusional actions and beliefs. You are correct about how we deal with this situation. Government was formed to provide the relationships that create good citizens, or in the alternative to save the community from members that threatened it. Even to the point of killing those members. Somehow we’ve lost these basics over the last 10,000 years. We need them now more than ever.

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