Notes on the Revolution / Column #61
January 24, 2020
Trump’s economic policy: A critical analysis
By Charles McKelvey
The economic policy of the Trump administration has four components: protection of U.S. industry and agriculture; reduced taxes; increasing military expenditures; and aggressive imperialism with respect to the Middle East and Latin America. In today’s Notes of the Revolution, we critically analyze these four dimensions.
First, the protection of U.S. industry and agriculture. Trump has presented himself as a defender of U.S. interests, and he has been orientated to tearing up the existing trade agreements and writing new ones that better defend U.S. interests. The renegotiated North American trade agreement and the trade agreement with China illustrate this approach.
The trade deal with China is especially important, and it was made possible not only by Trump’s insistence on a better deal for the United States, but also as a result of the approach to trade of the Chinese socialist project. China’s ascent has taken a road that departs from the European colonial, neocolonial, and imperialist strategy of ascent, in which a nation-state takes control of the natural resources of other lands through military or economic coercion. China seeks to ascend on the basis of intelligently conceived mutually beneficial commercial relations. The Chinese are taking a consensual, nonconfrontational road to ascent.
From the perspective of China and the Third World, the prevailing rules concerning intellectual property rights and technology transfers are designed to ensure that those who have knowledge and technology do not share it, and therefore, China has been evading them. But China made concessions here in the recent agreement. In addition, for the next two years, China agrees to buy U.S. energy, agricultural, and manufactured goods as well as services at the level of 2017 purchases. And U.S. tariffs on Chinese exports continue for the present, until a second phase agreement is reached. These are important concessions to U.S. demands and interests, and China makes them to avoid confrontation. At the same time, China will continue to subsidize state-owned companies, a fundamental aspect of its socialist economy. With this agreement, China can expect to continue to benefit from U.S. trade and continue its nonconfrontational socialist road to ascent.
A balance of trade deficit, in which the nations import more goods and services than it exports, has been one of the central problems of the U.S. economy since the 1970s. The protectionism of the Trump administration addresses the problem, whereas previous administrations did not. New trade agreements or understandings with China and North American and European trading partners, if they increase exports and reduce imports, constructively address what has been a long-standing negative tendency in the U.S. economy.
The second dimension of Trump’s economic policy is tax cuts. Here the Trump administration merely takes the false argument that the global elite has disseminated for the last four decades, namely, that tax cuts stimulate the economy. It is true that tax cuts stimulate middle class consumption, which indirectly stimulates production, but this has limited impact. What is needed is direct financial investment in production, but the tax cuts and low taxes since 1980s have stimulated financial speculation primarily, a phenomenon that is detrimental to the productive development of national economies. In recent decades, the socialist nations have adopted pragmatic economic policies that offer an important lesson, namely, that incentives to enterprises work, if they are targeted to specific sectors, designed to promote economic development in particular sectors. For example, if a nation wants to expand its capacity to produce alternative forms of energy, and the state itself does not have the resources for direct financial investment in the sector, it can give tax breaks to enterprises that do so. Reducing taxes in general, isolated from a tax structure that is integral to a plan for economic development, does not promote economic development.
The third component of the Trump economic plan is increasing investment in the military. To a degree, this makes good economic sense, because the military is one of the strongest industries in the nation. But the expansion is financed by government borrowing, thus increasing the public debt. This is part of a general problem, in which the government spends beyond its resources, increasing the public debt. This has been a problem for the United States since the 1970s, but Trump continues the trend. During his administration, federal government spending has increased larger than state revenues, and the state budget deficit has grown by 20.8 percent per year. The federal budget deficit has now surpassed $1 trillion. The Trump administration, by increasing military expenditures without a corresponding increase in taxes, reinforces a fundamental negative tendency in the U.S. economy.
The fourth dimension of the economic policy of the Trump administration is aggressive imperialism. With respect to the Middle East, the centerpieces of imperialist aggression have been the wars against Afghanistan, Iraq, and Libya, the proxy war against Syria, and the economic sanctions against Iran, which have, in essence, been carried forward by the Trump administration. With respect to Latin America and the Caribbean, the Trump administration has been more aggressive than previous administrations in the application of economic sanctions, ideological distortions, and support of oppositionist politicians directed against Venezuela, Cuba, Bolivia, and Nicaragua, which have been targeted for regime change.
Imperialist policies make good economic sense in the short term. The purpose of imperialist policies is to obtain access to the natural resources and markets of other lands. Indeed, the imperialist policies of the United States during the period of 1898 to 1965 were central to its economic development and to its ascent to global dominance by the 1950s and 1960s. In making America great again, Trump wants to restore the dominance that the nation possessed over two regions of the world, when it was at the height of its power.
However, in the present historic moment, a policy of increased imperialist aggression ignores fundamental global realities. In the first place, the neocolonized peoples of the world resist imperialist domination; through rebellion, revolution, and other ways; and they extract a high cost for imperialist penetration, a cost that is higher than what the United States can reasonably manage. In addition, the challenging problems that humanity today confronts require that the global powers leave behind their colonialist approach to foreign relations and search for forms of mutually beneficial cooperation with the neocolonized peoples and with the nations that are seeking a sovereign road. The world-system can no longer be sustained on a foundation in which each nation pursues its particular interests without concern for the consequences for humanity.
On balance, then, the economic program of the Trump administration, through its protectionism, seeks to reverse a long-standing negative tendency, the balance of trade deficits. But on the other hand, its policy of tax reductions combined with increased military expenditure reinforces another long-standing negative tendency, increasing state-budget deficits. At the same time, its aggressive imperialism is unworkable, out of touch with global realities, and it can only provoke greater global conflict.
It could be said that Trump has threatened war with Iran as a distraction from the impeachment process. But it also could be said that the impeachment process is a distraction from the fact that the Democratic Party is incapable of offering substantive critique of the Trump project, even less an alternative direction for the nation than attends to national interests, the needs of the people, and the challenges that humanity confronts. They are capable of only offering a continuation of neoliberal globalization, with perhaps a touch of New Deal liberalism, and a strong dose of identity politics. The competing proposals of Trump and the Democratic Party will have the strong and emotional support of the significant minority of the people, but neither band will be able to attain any more that a narrow majority or plurality; neither project will be able to attain a sufficiently strong majority to facilitate a governing consensus.
It is the historic responsibility of the U.S. Left to offer to the people such a project capable of forging a governing consensus, but it would need to find political intelligence and global and historical consciousness in order to do so.
This is Charles McKelvey, reflecting on the unfolding global popular socialist revolution forged by our peoples in defense of humanity.
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