If I were a vindictive person, the overwhelming temptation in this current moment in history would be to say “We told you so”. Sadly I am a vindictive person, but instead of saying “We told you so”, I’m here to say “They told you so”. Donald Trump as the next US president is what happens when people who’ve been screwed over by 40 years of neoliberalism and the last 8 years of unresolved financial crisis have put their own economic situation and democratic influence above the very real disaster of having a racist, sexist demagogue in charge of the world. This is simply what happens when we collectively ignore the urgent pleadings and advice of expert progressive economists, journalists, historians, writers, politicians and activists belonging to the fringe left (“alt-left”?) and indeed the rational centre, that the current system is thoroughly broken.
I don’t for a minute believe that a Trump presidency is a good thing on balance (though in this Orwellian era, anything is possible), but it was certainly predictable, and predicted, for those paying attention. And that’s precisely why it is so infuriating that all anyone seems to want to do in these moments is wash their hands of culpability. Never mind the decades of study, advocacy and counsel from the original progressives and alternative leftwing describing the economic, financial, environmental and political unsustainability of neoliberal finance capitalism cooked up since World War II. While this particular version of capitalism has been subscribed to by all major political parties in the West, and indeed most minor parties, first and foremost it is a system subscribed to and forgiven by modern liberal elite culture.
The Left forgot the GFC, Trump reminded us
To state the obvious, the rise of Donald Trump is the delayed political fallout from the GFC, its root causes, and its failure to be resolved by 8 years of Democratic party leadership in the US. Trump is a product of where we have come from. Progressives have had so many opportunities to put forward a genuine alternative, even stage rebellion against our evidently broken economic system, but in each case either failed or politely declined, opting instead for “lesser of two evils” Realpolitik. Now the right-wing alternative has filled that vacuum.
The problem stems from an inability to comprehend exactly why and how the current system is broken. It originates in the cognitive dissonance that is able to identify growing inequality as an urgent problem, but is unable or unwilling to identify and act on the root causes, being the unprecedented and unsustainable rise in private debt across the world and the over-financialisation of advanced economies, resulting in the first ever “industrial devolution” across Western liberal democratic societies.
One of the numerous classical progressive economists who do understand the why and how is Michael Hudson, whose encyclopedic knowledge of economic history is the starting point that we need in finding the way forward from this perpetual crisis. Like his contemporary Steve Keen, he predicted the GFC because he understood its provenance, and believes that its perpetrators did as well. As he explains in a recent interview:
“We’re in a permanent debt deflation. To make it brief, people think in terms of business cycles – as if whenever things go down, they automatically recover. But every business recovery since World War II has taken place with a higher level of debt – higher and higher and higher. Finally, by 2008, the volume of debt was so high that it was absorbing all the economic growth. At that point the stock markets plunged, especially when it became apparent that the business plan of the large banks was economic fraud and junk mortgages.
People say when Queen Elizabeth asked “Why didn’t anybody foresee it?” The fact is, everybody foresaw that there was going to be a crash. That’s why they used the term “junk mortgage.” That’s why they coined the term NINJA: No income, No job, no assets. All this terminology was widely used. The FBI in 2004 explained that there was the largest wave of financial bank fraud in history, but George Bush shifted the investigators out of the FBI into national security, so nothing was done.
When President Obama ran for election, he promised to write down mortgage debts to the real value of property, not the junk mortgages in excess of the value. The terms that Congress set for the bailout of the banks, the Troubled Asset Relief Program or TARP, were that banks would rewrite the mortgages so that homeowners who could not pay the nominal mortgage would simply pay what the rental value of their property was.
In practice nothing was done. The banks were saved, not the economy. Tim Geithner, who was a protégé of Robert Rubin, was moved on behalf of Citibank into the Treasury, and he bailed out the banks – leaving all the debts in place, not writing them down. Banks stopped lending mortgage money, and began to call in their credit card loans by about 100 billion dollars, from one trillion to about 900 trillion. Mortgages were not written off, so homeowners had to pay so much money to pay off the debts that had been built up during the bubble economy that they didn’t have enough income left to buy goods and services.
It is therefore the height of arrogance and delusion for the progressive and conservative establishment alike to dismiss this result as another bunch of racist hillbillies not knowing what’s good for them, just as the Brexiteers were naively cast, without taking stock of the ongoing economic and financial disasters inflicted on all of us, and by virtue of collective inaction, perpetrated by all of us. In order to pass such judgments, we need to first consult those that did predict the crisis because they understand the problem.
To not shoulder at least some of the blame for this perceived disaster, and the apparent crisis of Western democracy, is to not have been paying attention. It wasn’t ‘hillbillies’ and ‘bogans’ who destroyed the global economy by blowing the largest global debt bubble in history, bailed out criminal bankers, de-industrialised the developed world, privitised the commons, delivered the people to the rentiers and monopolists, privitised unearned financial gains while socialising the losses etc. etc. The list really does go on and on.
The reason that progressives cannot properly understand or acknowledge how Trump could win is actually the same reason that he did win: our blinding sellout to this set of policies most commonly referred to as neoliberalism, or neoclassical economics.
There have been hordes of commentators describing the bad sales job, the need for better communication, the need to listen to disenfranchised peoples etc. These are indeed shortcomings of the modern political order, and the total failure of the DNC to back the one viable progressive candidate they had is clearly a key issue. But it still completely misses the point. It’s not the marketing that is rubbish, it’s what you’re selling. We need a revolution in economics to fix the world’s panoply of structural problems, not just a sympathetic ear with pretences to caring about the little person. Nothing enfranchises a person more than economic and social inclusion, and that’s going to take a lot of hard work, not just a better salesperson.
The Left forgave war mongering, Trump held up a mirror
Perhaps even more galling than the widespread failure of the Left to diagnose and reform our broken economic and financial system, is that we so happily ignore or whitewash the documented fascist tendencies and war mongering of the Clinton and Bush empires (of which the Obama regime was simply an extension), and ironically, their continued interference and destabilisation of foreign regimes. The US neoconservative duopoly long ago swept up the neoliberal political caucus into its bosom, and over the course of the last 15 years, the mainstream Left have normalised and become apologists for the unending imperialist quest for US supremacy and hegemony in all matters military, geopolitical, cultural, economic, and most recently financial.
Additionally, the Left under Obama have become overseers and even architects of some of the most totalitarian and aggressive policies the US has ever perpetrated. For those of us struggling to recall, here is a sample of Obama’s legacy:
- The increasing militarisation of the police force
- The regression of civil liberties including wholesale and indiscriminate spying on its own citizens
- Extrajudicial executions in the form of illegal drone strikes on sovereign states, including against its own citizens
- Torture and indefinite detention of foreign fighters and terrorism suspects, including its own citizens
- The creeping presumption of guilt infiltrating law and order, backed by the disintegration of media integrity
- The unending extrajudicial powers in service to a “war on terror” that began 15 years ago, with still no end in sight
- A failure to withdraw from ongoing wars in the Middle East, wars costing millions of civilian lives
- The funding and arming of extremists when and where it suits US interests – even if it means supporting the likes of Al Qaeda, as has happened in both the original Afghan war in the 80s and then again in the modern Middle Eastern conflicts leading directly to the rise of IS and civil war in Syria
- Multiple new military interventions across the Middle East and Africa including Libya and Syria
- Support for brutal, totalitarian and aggressive client states such as Saudi Arabia while simultaneously condemning the same perceived traits in states and regimes not aligned with US interests – such as Syria and Iran
- Build up of military presences in Europe and Asia, contrary to post World War II treaties and NATO’s own constitution
- Provoking a New Cold War with Russia and China, on the way to a nuclear World War III
These are documented facts, not conspiracy theories. This is the dual neoliberal / neoconservative nexus in the modern era, and when asked to vote for these bipartisan policies time and again, eventually the polity was going to reject it. It just so happens that an unhinged rightwing demagogue was the first to describe an alternative. And despite the denial of most leftwing commentators, his alternative actually contains some policies of merit. Such as opposing protectionist “free” trade agreements, and more importantly, not continuing the legacy of destabilising the Middle East and Eurasia by periodically removing regimes unfavourable to US interests.
One of the only potential positive aspects of the Trump ascendancy is that both the Clinton and Bush political empires were destroyed – or at least severely disarmed politically. And with their disarmament, other things equal, comes the disarmament of the most destabilising escalation in geopolitical tensions, risks and regional wars since the Cold War. Far be it from me to predict whether or not Trump will stick to his word on foreign policy, but the balance of probabilities and available evidence suggest we ironically stand a better chance of avoiding World War III under Trump (who, awkwardly for pro-peace liberals, has already announced an end to the longstanding Washington consensus policy of “regime-change” – though has also ramped up hawkish rhetoric against China) than under another Democratic administration.
As veteran leftwing warrior and maverick journalist John Pilger wrote before Trump’s election about the New Cold War started by the US, and the dangers presented by the “lesser of two evils”, Hillary Clinton:
“In the circus known as the American presidential campaign, Donald Trump is being presented as a lunatic, a fascist. He is certainly odious; but he is also a media hate figure. That alone should arouse our scepticism.
Trump’s views on migration are grotesque, but no more grotesque than those of David Cameron. It is not Trump who is the Great Deporter from the United States, but the Nobel Peace Prize winner, Barack Obama.
According to one prodigious liberal commentator, Trump is “unleashing the dark forces of violence” in the United States. Unleashing them?
This is the country where toddlers shoot their mothers and the police wage a murderous war against black Americans. This is the country that has attacked and sought to overthrow more than 50 governments, many of them democracies, and bombed from Asia to the Middle East, causing the deaths and dispossession of millions of people.
No country can equal this systemic record of violence. Most of America’s wars (almost all of them against defenceless countries) have been launched not by Republican presidents but by liberal Democrats: Truman, Kennedy, Johnson, Carter, Clinton, Obama.
In 1947, a series of National Security Council directives described the paramount aim of American foreign policy as “a world substantially made over in [America’s] own image”. The ideology was messianic Americanism. We were all Americans. Or else. Heretics would be converted, subverted, bribed, smeared or crushed.
Donald Trump is a symptom of this, but he is also a maverick. He says the invasion of Iraq was a crime; he doesn’t want to go to war with Russia and China. The danger to the rest of us is not Trump, but Hillary Clinton. She is no maverick. She embodies the resilience and violence of a system whose vaunted “exceptionalism” is totalitarian with an occasional liberal face.”
The Left already has the solutions, Trump does not
The current descent of the Left into shock, denial, hate, generalisations, excuses, and even McCarthy-esque anti-Russian paranoia tells us all we need to know about why this happened. George Orwell would be horrified and unsurprised at the way in which mainstream liberal and leftwing society has come to reflect the most regressive economic policies, and the most warmongering foreign policies. Conservatives have been their partner the whole way, but ultimately it is incumbent on progressives to describe and create the alternative, and therefore more fault ultimately lies with this failure to execute the alternative.
We know that the current breakdown of economics and politics in the developed world is fundamentally about inequality and the refusal of those in positions of power to fix it, and crucially the refusal of people who benefit from it to acknowledge it and support the solutions. So the only rational way to fight back and correct the broken system is to understand what is causing the inequality. And as I detailed in my recent article, it all comes down to the last four decades of unprecedented increases in the level of private debt compared to the surplus produced by our economies.
The period of the ‘Great Moderation’ in the 80s and 90s wherein living standards, economic growth, financial wealth, fixed asset prices, financial deregulation and global trade liberalisation proceeded on an uninterrupted upward trajectory, was an anomaly in which rising debt levels replaced stagnating real incomes, creating the illusion of unprecedented stability and prosperity. The Global Financial Crisis unmasked that illusion, but rather than seizing the opportunity to reform the financial and economic system and cancel the rapacious and unproductive debts that would never be paid – as has almost always been the historic solution to financial, economic and political crisis caused by debt saturation – the liberal elites chose instead to extend and pretend.
A few short years ago, it was still widely acknowledged that the root causes of the crisis had not been fixed, and that respective authorities and central bankers were simply kicking the can down the road. Despite the fact that these root causes and imbalances are mostly worse now than they were in 2008 (global debt levels being chief amongst them), the shock and dismay expressed by modern neoliberals and the collective media establishment suggests that only 8 years later, with none of the underlying problems resolved, the crisis has been assumed to be solved.
In order to understand why the record level of global debt is the cause of the global ‘secular stagnation’, one only needs to look at the current global private debt level of around 150% debt to global GDP. If debt to economic output is at 100%, and average interest rates are at 4%, we need to grow our incomes and economy by at least 4% to ever have any chance of paying down the debt – assuming no voluntary fall in living standards. So to ever deleverage from 150% of GDP, the world would ned to grow at greater than 6%. It’s pretty clear that is no longer possible (even putting aside the obvious ecological and resource limitations to this level of growth), and that the result is exponential escalation in debt levels, and ever greater portions of income being swallowed up by debt servicing and the unproductive parasitic financial sector.
The global economy has therefore become a giant Ponzi scheme, wherein new debt is required in order to service old debts. This is why there has been no recovery. It’s called debt deflation, and it is well understood by the students of economic and financial history that it is well past time to listen to.
There is simply too much private debt, and its destroying the real economy, and causing most of the rise in inequality experienced over the last few decades. This is no mystery, and is the fundamentally unresolved global crisis that unchecked will cause further political shocks, financial crises and economic collapse. There is a long and inglorious human history of such breakdown in society and indeed civilisations being caused by an over-indebted private sector and an over-financialised economy that extracts the profits from it. The Roman Empire was one of many examples, whose collapse was ultimately brought about by debt saturation and over-financialisation, and manifested first in economic crisis, then political crisis. What followed was the Dark Ages, wherein the European continent spent several hundred years at war.
Michael Hudson, who famously proclaimed and proved “Debts that can’t be paid, won’t be paid”, explains some of the required and once well-understood solutions:
“In the end there’s only one way of solving the problem. That’s to write down the debts. There is no way today’s debts can be paid. The only way to free the economy from these payments for debt service is to write down the debts. That’s what finally happened in Rome. That was what Jesus’ first sermon was all about, wanting to restore the Jubilee Year.
That’s what finally happened in the 1920s when Germany and the allies were pushed into depression by German reparations to the allies, for them to pay their Inter-Ally war debts to the United States. Finally these were all cancelled in 1931.
So after about a decade of depression, there will be enough people who will finally see that the debts have to be written down. But there’s not that awareness yet, because there is a feeling that money doesn’t matter – that debts don’t matter, and the economy is really just barter. Unless people think of debt in terms of the whole economy being wrapped in a context of debt and property ownership and rent extraction, they won’t realize that’s what’s being sucked out of the economy doesn’t have to be. It doesn’t have to be this way.
[The alternative is] the view that classical economists had. They were reformers. Their idea was to keep natural monopolies – including health care and pharmaceuticals, water and electricity – in the public sector. You’d have a public alternative to provide basic services and basic needs at cost.
The first business professor in the United States, Simon Patten, said that government infrastructure is a fourth factor of production, alongside labor, land and capital. But unlike private capital, it doesn’t aim at making a profit. It aims at supplying health care and water, and banking either at cost or at a subsidized price or freely. That’s how you make an economy low-cost. If there is a natural rent in some land sites, you use that as a tax base. You tax economic rent, not labor, not industry. Basically, you tax free-lunch income. You don’t use a tax system that adds to cost instead of subtracting from costs.”
Trump’s election is more than anything else, a rude wake up call to the forgetful elites and bourgeoisie that the Great Moderation is over, and the GFC that represented its zenith and the beginning of its end have not yet been resolved, and unless we fight hard for the necessary revolution in economics, the much-needed political, social and environmental revolutions will never eventuate to save us from another Dark Age. The entitled, comfortable, ‘sustainable’, individualistic, self-referential, urban, cosmopolitan, post-GFC bubble has been burst, and if nothing else good comes from recent events and the next number of years, it is this fact.
So, like many people we’d rather not have to listen to, I’m here to say they told us so, and they have the solutions. It’s not like we need to scratch around for the solutions or the substance and structure of this revolution. The real progressives like Michael Hudson and Steve Keen have been discussing it for a least a decade. It is the height of intellectual laziness to throw our arms in the air and claim that “the Russians did it”, when we actually have all the answers we need to begin a progressive counter-revolution.
Here’s a high level sample of their solutions:
- Rediscover and rebuild economic education around classical economics and the distinction between earned and unearned income, or economic rent
- Restore the role of money, banks and debt in modern economic models, which essentially are blind to these factors (which is why the economic establishment failed to foresee the GFC)
- Implement a modern debt jubilee, forgiving all odious national and private debts other than labour and business-to-business debts, by issuing a once off citizen dividend that must first be used to pay down debt, in order to not penalise net savers
- Restore the creation of money as an exclusive public / sovereign privilege, not a monopoly freely granted to the private banking sector
- Shift taxes away from labour and capital and onto economic rent, most crucially the unimproved value of land
- Institute a universal basic income, paid for with the proceeds of economic rent taxes, which in turn ensure that the citizen’s dividend is not simply capitalised into asset prices – the key defect of UBI in isolation
- Replace political donations with publicly and proportionally funded election campaigns
- Craft a global treaty to shut down internationally sanctioned tax avoidance mechanisms such as transfer pricing and profit repatriation.
- Restore the commons to the people by:
- returning all natural monopolies (possibly even land according to some) to public ownership and governance,
- taxing 100% of the economic rent for monopolies that are not centrally owned and governed (eg. land),
- 100% taxation of ‘negative externalities’ such as environmental pollution, damage to public health and corporate crime, and
- enshrining access to land, clean air and and water as fundamental universal human rights
- Pursuit of an “Open-Source Everything” model for democracy, governance, defence, intelligence, community, religion, economics, finance, commerce, healthcare, engineering, infrastructure, agriculture and the environment
These solutions cannot easily be dismissed as Socialist, or Marxist, or even as “redistribution” – so hated by the Right. They are simply the rational and correct solutions to our economic, financial, social and environmental imbalances, precisely because they are simply “distribution” of the value that is created by out collective human endeavour and provided by the natural resources that we must all share, yet which has been allowed to be captured by the few. And this prosperity has been captured not through genuine innovation and investment, but through privilege, monopoly, deregulation, systematic tax avoidance, corruption and war. In other words, rent-seeking and imperialism. No one deserves to have an empire, and no one has a monopoly claim to economic rent.
The fundamental imbalance described by classical economics was this distinction between earned and unearned income, and the monopolies of land, natural resources and banking – among others – must not be allowed to fall into the hands of the few. That is a Tragedy of the Commons, where the fruits of our labour and enterprise, and the air, water and land that we all need for survival, are privitised in the possession of the monopolists and rent-seekers, the idle rich who must instead be obliged to return or “distribute” their windfall gains to the people and community that created it. The alternative is oligarchy and more Donald Trumps, repeated financial crisis, economic stagnation and collapse, environmental collapse, political revolution, and inevitably violence and war. The Left and the right must bear equal responsibility for this collective tragedy.
These solutions should appease the Left and the Right, Progressives and Conservatives, as they are actually supportive of genuine free markets, limit government ownership and regulation to where it makes most sense – in natural monopolies and provision of low cost essential infrastructure, encourages genuine productive endeavour, investment, and efficient and sustainable use of land and limited natural resources, and ultimately ensures the each person can share in our common prosperity and enjoy the most fundamental right and prerequisite for earning a living: access to land without the burden of onerous debt, interest and usury.
It’s time for self-reflection, time for humility, and time to get behind the solutions that have already been laid out by those that understand the problem. Spread their word every chance you get. It’s time for the Left to steal revolution back from the Right, and it starts by rediscovering, reclaiming and rebuilding economics from the ground up. We have a way forward, we have only to listen and act.