What’s the agenda behind Trumponomics?

July 5, 2017

Donald Trump campaigned for president on a platform of reindustrializing the U.S. to create jobs and strengthen American power, even if it means abandoning the NAFTA trade deal and confronting China. Lee Sustar looks at how far the Trump economic agenda has gotten in his first six months--and where it might go from here.

GIVEN THE chaos emanating from the White House, it can be difficult to track the progress, or lack of it, of Trump's economic program. Is he really implementing the nationalist agenda he promised?

TRUMPONOMICS, AS it is inevitably called, is full of contradictions.

Like the rest of the Trump operation, the White House economic program reflects a highly unstable coalition.

Much of his program has little or nothing to do with nationalism. It is purely a smash-and-grab operation by the wealthy and powerful. The central example is the proposed health care legislation to gut Obamacare that would also eviscerate Medicaid and funnel the "savings" to the rich in the form of tax cuts.

Similarly, the sweeping environmental deregulation being carried out by executive order is primarily aimed at boosting profits, enabling heavily polluting industries to lower their operating costs.

Lowering the cost of domestically produced energy is a particular focus, since reducing energy bills for manufacturers boosts U.S. industrial competitiveness. This strategy not only reduces U.S. dependence on foreign oil, but also positions the U.S. as a net energy exporter.

Donald Trump
Donald Trump

Policies like these are Trump's anti-impeachment insurance. They placate Corporate America as a unified Republican federal government tries to maximize a once-in-generations opportunity to cut the remnants of the U.S. welfare state and lock in the social inequality that had been rising for decades before Trump came to power.

With so much of the corporate wish list within reach, big business is willing to tolerate Trump for now, no matter how outrageous the scandals and allegations of corruption. But they haven't been shy about pushing back, with the Koch brothers-funded Americans for Prosperity opposing Trump's plan for deficit spending by the federal government to fund Trump's infrastructure program.

GIVEN THE recovery of the U.S. and world economy since the Great Recession, will the economic nationalists lose their momentum?

THE ECONOMIC nationalists are gaining ground politically because mainstream economic policy has not been able to overcome the impact of the Great Recession of 2007-09.

In the U.S., average annual economic growth since the recession has been 2 percent, compared to an average of 3 percent since the Second World War. That may not seem like much, but it adds up to a lot of dollars in an economy with an $18.8 trillion annual Gross Domestic Product (GDP).

In Europe--which stumbled into a second recession in 2012--the picture is much worse, and banks remain wobbly. Japan, the rising economy of the 1980s, has struggled with stagnation for more than 20 years.

The developing countries--or emerging markets, to use the current term--thus accounted for 80 percent of the growth of global GDP between 2009 and 2016. Few would have predicted this a decade ago.

That's why there was a brief international stock market turmoil in January 2016, when a slowing Chinese economy seemed to be on the brink of a financial crisis.

China-dependent commodity exporters like Brazil suffered extremely deep recessions. The advanced countries remained mired in what former Treasury Secretary Lawrence Summers calls "secular stagnation," reviving a term first used in the Great Depression of the 1930s.

Now, the U.S. and Europe are reviving in large part due to a huge stimulus through zero and even negative interest rates. Along with this has come "quantitative easing"--the equivalent of printing money to raise economic growth--in which the 10 biggest central banks--mainly the U.S. Federal Reserve, European Central Bank, Bank of Japan and Bank of England--bought up bonds totaling $21 trillion in 2016. That's the equivalent of one-third of the world economy.

Another critical boost to the world economy came from China. The government stepped in with $1.1 trillion in stimulus spending on infrastructure that began in 2015--easily the biggest by a single country in world history. Since then, there's been even further stimulus that is hard to measure, as China funneled through a huge expansion of credit--$1.8 trillion in 2016 alone, according to Reuters.

This spending helped to spur economic growth worldwide, stabilizing the price of oil somewhat in 2016 as well as spurring imports of high-end goods from Germany and other advanced countries.

Yet the stimulus hasn't been sufficient to return China to the 10-14 percent annual rates of growth it has frequently reached over the last 20 years. Plus, the spending has resulted in a huge increase in private and public debt, much of it by local governments investing in what may be white elephant projects.

This is part of what one prominent business economist calls a potential "tidal wave" of debt. Emerging markets are grappling with $15 trillion in debt that will be harder to repay as the U.S. Federal Reserve slowly raises interest rates and winds down quantitative easing.

Moreover, the latest phase of Chinese expansion will add to the crisis of overcapacity and overproduction that underlay the Great Recession and continues to exert a downward pressure on profits and prices. The quintessential example is steel: China now has half of the world's steelmaking capacity and is increasingly looking for export opportunities.

So the competitive pressures are set to intensify, not diminish. Chinese leaders have their own program of economic nationalism. This year, the government announced an economic transition in which Chinese companies will move into high-profit sectors like aerospace and information technology. Rather than serve as a manufacturing platform for U.S., European and Japanese corporations, Chinese companies will compete with them head to head.

While the U.S. drifts towards protectionism, Chinese President Xi Jinping has emerged as one of the world's most prominent champions of globalization. And not just rhetorically: China will invest $900 billion in a "New Silk Road" to improve transportation and trade between Asia and Europe.

But a rising China is only part of the sharpening of competition in the world economy.

Since the Great Recession, there has been a slow-moving currency war in which countries try to manipulate exchange rates to make their exports cheaper on the global market.

At the same time, the Group of 20 advanced countries ratcheted up trade barriers in 2015. The international flow of goods has stagnated for the past five years--a sign not only of slow growth, but a stall in the tendency toward globalization.

We've also seen an intense oil price war, in which Saudi Arabia ramped up production to try--unsuccessfully--to wreck the U.S. fracking industry. The oil price war, in turn, helps drive shooting wars in Syria, Iraq, Yemen and Libya and rising tensions between Saudi Arabia and Iran.

These are some of the factors underlying the political crisis for establishment political parties in countries around the world. Much of the benefit has gone to the nationalists and far right in several countries, most notably in the Netherlands and France. The British referendum vote to leave the European Union--Brexit--was a partial reflection of this trend.

At the same time, there are signs of potential for the radical left. The triumph for left-wing Labour Party leader Jeremy Corbyn in UK elections last month is the leading example so far.

DO TRUMP'S economic nationalists really have a coherent plan for the U.S. economy?

BECAUSE THE U.S. capitalist class has no consensus about how to deal with persistently low economic growth rates and the rise of China, Trump's motley economics crew has the opportunity to shift U.S. economic policy rather dramatically. That's assuming, of course, that the White House is not overwhelmed by its political crises first.

Trump's economic nationalist camp is headed by outspoken economic nationalists like former Breitbart News chief Steve Bannon and White House Trade Council head Peter Navarro, an academic who titled his recent book and documentary Death by China.

At the other end of the spectrum is the head of the White House Economic Council, Gary Cohn, who left his job as the Number 2 at Goldman Sachs to oversee Trump's economic policy. Cohn's ascension to that post is typically seen as Wall Street's attempt to reign in Navarro and Bannon, and carry out as conventional an economic policy as possible.

In fact, the most important player may be Commerce Secretary Wilbur Ross, a billionaire who made much of his fortune by buying up distressed assets like textile and steel mills and using bankruptcy law to cut wages and benefits while flying a "Buy American" flag--and often gaining backing from labor unions to boot.

Ross' economic nationalism has its limits. After purchasing bankrupt steel companies, he was happy to order the dismantling of one of his Cleveland steel mills and have it shipped to China. And he later cashed out by selling the entire operation to Arcelor-Mittal, itself the product of a merger of Indian and European steel corporations.

These days, however, Ross has returned to his Buy American themes in favor of propping up the U.S. manufacturing sector against foreign competitors--not just China, but others. He's cited national security as a justification for possible measures to bail out individual companies like the Japanese-owned company Westinghouse, a nuclear energy provider, and the U.S. steel industry.

IS ALL this aimed at China?

IT ISN'T just China that's seen as a threat. Navarro has taken aim at Germany for its huge trade surplus, while denouncing the European Union (EU) as essentially a vehicle for German power.

Bashing Germany on trade is closely tied to Trump's complaint that NATO countries other than the U.S. don't pay enough to support the military alliance. It's a small but telling example of how U.S. economic nationalism is inextricably linked to U.S. imperialism--and not just under the Trump administration.

From the early 1930s into the 1960s, protectionism and nationalism was the default setting for U.S. economic policy, with Democrats controlling the White House most of the time. It was the era of "guns and butter"--a rising standard of living and huge military spending to fund the Cold War with the USSR and the U.S. war in Vietnam.

U.S. industrial policy--particularly in steel, aerospace and information technology--was closely connected to its imperialist policies. Big business and its political operatives therefore called for free trade in general, but turned protectionist when it suited their interests.

In the early 1960s, the U.S. accounted for 40 percent of world production, so it was often in a position to dictate terms. Today, the U.S. share of world GDP is 20 percent.

Since the late 1970s--that is, during the neoliberal era, which is shorthand for a set of policies including freer trade, deregulation, austerity and increased cross-border financial flows--the U.S. capitalist class tolerated a certain degree of de-industrialization. U.S. companies and banks funneled investments to sections of the globe that had been previously closed off from the world economy--the former Stalinist states in the USSR and Eastern Europe, for example.

China, meanwhile, avoided the political collapse of its own variety of Stalinism to become an eager partner with Corporate America. U.S. bosses, in turn, embraced sources of low-cost production to compete with new rivals--Japan at the beginning, but also Western Europe and, increasingly in some sectors, newly industrializing countries such as Brazil.

After the collapse of the USSR in 1991, the U.S. was the world's sole superpower. The U.S. could cut military spending as a proportion of GDP from 8.4 percent in 1960 to 3.3 percent in 2016, while still vastly outspending its rivals. It was global domination at less than half the former price.

Meanwhile, U.S. businesses could roam the globe in search of low-cost labor, little regulation and compliant governments. As former General Electric CEO Jack Welch put it, "Ideally, you'd have every plant you own on a barge to move with currencies and changes in the economy."

This turn in the world economy had a profound impact on the class struggle in the U.S.

Take the kind of heavy equipment manufacturer that Trump presumably wants to boost. Since the early 1990s, Caterpillar built nonunion plants in the U.S., expanded overseas and defeated the United Auto Workers in two epic strikes--slashing wages for new hires and cutting benefits along the way.

Further, the twin U.S. federal budget and trade deficits, once seen as threats to U.S. economic and imperial power, now seemed almost irrelevant to the people in charge. "Deficits don't matter," as former Vice President Dick Cheney put it.

That was the justification for the Bush Jr. administration's move to cut taxes while waging simultaneous wars in Afghanistan and Iraq.

By contrast, in the 1950s, Republican President Dwight Eisenhower oversaw a top marginal tax rate of 90 percent to fund the Korean War and the military rivalry with the USSR.

Today, the world is much more complicated for U.S. imperialism. America doesn't have a peer competitor militarily, but China's unprecedented industrial transformation will change that over time unless the U.S. responds.

That's the essence of Trump's argument--and behind him, the assemblage of current and former generals who run the National Security Council, Pentagon and Department of Homeland Security. And it's no coincidence that Secretary of State Rex Tillerson comes to his job from running ExxonMobil, given the close integration of Big Oil with U.S. imperialism for the past century.

These people converge with Bannon and Navarro on the need to get tough with China to prevent its further rise as a strategic competitor with the U.S.--the central aim of U.S. foreign policy since the Second World War.

The furor over Trump's ties to Russia must be seen in this context. The fixation on Russia--leaving aside the particulars--is in many respects a surrogate for a debate on how to deal with China.

That's a discussion that many U.S. capitalists who have intertwined themselves with China are reluctant to have--think Apple and many other U.S. tech manufacturers. General Motors sells more cars in China than the U.S.

WHAT ARE the specifics of Trump's economic nationalism so far?

ALL THIS is too big for Steve Bannon and Peter Navarro to drive on their own.

Key players in Corporate America support some or all of this program, along with mid-sized manufacturing firms that often bear the brunt of foreign competition. They may be a minority within a U.S. capitalist class that has generally benefited enormously from globalization. But with Trump's election, the economic nationalists have outsized political clout.

But it isn't just Trump. Economic nationalism is also the impulse behind House Speaker Paul Ryan's proposed border adjustment tax, a measure that would supposedly "level the playing field" for the U.S. against its international competitors.

Big manufacturing exporters like General Electric are for it, but hardline opposition from politically powerful companies like Koch Industries has apparently blocked the measure, at least for now.

So there's a partial convergence of several currents pushing elements of economic nationalism. It's caused consternation in the leading circles of U.S capitalism and policymaking elites in Congress, the think tanks and the government bureaucracy.

The debate is perhaps sharpest on the future of the North American Free Trade Agreement (NAFTA). So far, the administration has moved against Canada to shore up the U.S. lumber and dairy industries. So the U.S. will attempt to strong-arm Canada as well as Mexico in the upcoming NAFTA renegotiation.

Trump's version of economic nationalism may not succeed. But given the vacuum of ideas about how to revive U.S. economic growth--witness Hillary Clinton's clinging to an unpopular status quo as "already-great America"--the nationalists at least have something resembling a strategy.

It's also possible that the Democrats will put forward their own version of economic nationalism. Senate Minority Leader Chuck Schumer in June proposed his own China-bashing position, tweaking Trump for being soft on Beijing. Bernie Sanders' avoidance of any serious critique of U.S. imperialism while taking pro-worker, anti-free trade positions harkens back to the economic nationalism of liberal Democrats of the 1960s.

DOES TRUMP have the political base to achieve his economic aims?

THAT DEPENDS on many factors--critically, the growth of working-class resistance rather than the Democratic Party strategy of waiting around for Trump to self-destruct.

Steve Bannon is betting that a ramped-up economy that creates enough industrial jobs can position Trump to repeat his Electoral College victory in several of the so-called Rust Belt states--though the proposals for massive infrastructure spending are probably the most strongly opposed element of the Trump agenda within the ruling class.

Trump's crackdown on immigration and his Islamophobia are absolutely central to his economic nationalism. By deporting workers from Mexico in particular and intimidating others into leaving, Bannon and Attorney General Jeff Sessions are out to contain or reverse demographic trends. Their aim is to fuse economic nationalism with "white nationalism"--one of the euphemisms for the semi- and openly fascist elements that have surged into view since the Trump election.

The Islamophobia component of the program does double duty--helping justify scapegoating a section of immigrant workers at home while building political support for U.S. military action in the Middle East and Afghanistan.

Trump's team aims to appeal not only to factory workers whose jobs have been threatened or eliminate, but also to technical-professional middle-class people who fear immigrant technology workers.

That's why Trump used his April speech at a Wisconsin factory to both call for trade protection for industry as well as limits on the H1-B visas often used by information technology outsourcing firms. Meanwhile, Bannon has made a particular point of targeting Silicon Valley CEOs with South Asian backgrounds.

All this presents a challenge to organized labor to put forward a pro-worker, pro-immigrant and anti-racist program for economic development. The AFL-CIO has challenged Trump's immigrant-bashing. But this opposition is badly undercut by some union leaders' embrace of Trump's plans for infrastructure spending, such as Laborers' leader Terry O'Sullivan.

The attempt to pick and choose among the initiatives in Trump's economic policy inevitably gives the Bannons and Navarros the political cover to pose as friends of the working class, even as the administration carries out the most pro-business, anti-worker White House agenda since the 1920s.

HOW SHOULD the left respond to Trump's economic nationalism?

THE FIRST task is to expose the lie that Trump's agenda is, in reality, a pro-boss, anti-worker program. He may slam corporations for shutting factories, but he's not interested in workers getting a decent wage or job security.

Trump's economic nationalism is all about renovating U.S. capitalism to meets its global challenges--and that means giving employers lower taxes, lighter regulations and a workforce shorn of legal protections, whether or not they have a union.

Another priority for the left is to develop an agenda for organized labor--including organizing the unorganized--that rejects Trump's racist nationalism in favor of an internationalism based on workers' solidarity against global corporations. That will involve rejecting Trumponomics, but also the corporate globalization pushed by the Democratic Party.

It's a big task. But the last year has seen the largest revival of the socialist left in decades. Putting forward a socialist perspective for the future will mean challenging Trump's economic program with a fight for workers' solidarity and internationalism. It's an argument we can win.

Further Reading

From the archives