In a recent post on this site, economist Martin Wolf (FT) was quoted, reminding readers of the words of Theresa May, the prime minister, in her speech to the Conservative party conference last year: “Our economy should work for everyone, but if your pay has stagnated for several years in a row and fixed items of spending keep going up, it doesn’t feel like it’s working for you.” She earnestly promised that this would change.
He continued: “Was Mrs May’s speech hypocritical? Yes”. (See MP Dawn Butler, 2nd paragraph)
In similar vein, Jenni Russell writes:
“The president’s actions are more important than his words, and they are a betrayal of his voters
“President Trump is brilliant at diversionary tactics, whether tweets, tantrums, or executive orders that may or may not mean anything in practical terms. His speech to Congress was another in his string of conjuror’s illusions.
“Breitbart and the Trump base adored it for its promises to put American workers first, improve their healthcare, incomes and education, cut their taxes, and protect them from danger abroad and immigrants at home. Trump’s liberal critics were momentarily dazzled to find that for at least an hour the president was capable of addressing the nation in a reasonable, conciliatory tone. But we now know that Trump’s public promises and assertions are so full of contradictions that they cannot be taken either literally or seriously.
“Instead we have to scrutinise the practical consequences of the policies his team is implementing. The effect of these won’t be to transform the lives of the people he swore to champion. They will make the rich much richer at the expense of the middle class and the poor”.
She notes that Trump’s tax plan is overwhelmingly skewed towards the wealthy:
- America’s Tax Policy Centre shows nearly half of the total tax cut will go to the top 1% of taxpayers.
- Almost a quarter will be spent on the richest 0.1%, households that earn above $3.7 million a year.
- The middle fifth of households, earning an average of $65,000, will gain just a thousand dollars.
- Less than 7% of the total cost of tax cuts will be spent on them.
- Because Trump intends to drop tax exemptions for children, some families earning less than $50,000 a year will actually see their taxes rise.
- The budgets for education, childcare and medical research will be slashed by at least 15% per cent.
- Trump proposes to end the state tax, which affects only the top 0.2 per cent of the population.
- His proposed cuts to corporation tax range from 35 to 20%
This surreptitious transfer cannot be what Trump supporters expected
Jenni continues: “Trump’s promise to create jobs through a vast infrastructure plan are equally tilted towards the rich. Investors will be offered tax breaks costing $137 billion to encourage them to invest a trillion dollars in projects that offer potential returns from fees or tolls. And far from bringing jobs to depressed regions, the projects will be skewed towards wealthier areas, because there will be no incentive to invest in areas where there’s no hope of a financial return, like the crumbling roads of the Appalachians”.
Still justified by demonstrably failed trickle down theory
Republicans defend this kind of unbalanced reward as they always have, arguing that the more money individuals keep, the more they will spend and the more everyone will benefit. These policies – in addition to the cuts Trump is demanding to pay for his boom in defence spending – will add huge sums to the deficit and drastically shrink the money available for public programmes. Jenni ends:
“Trump promised to protect his voters but the gulf between what he pledged and what he’s delivering is evident everywhere. His teams are busy dismantling consumer, financial and environmental regulations that prevented ordinary people being fleeced or having their land and water defiled. His supporters stubbornly believe in him but they are being betrayed. There can only be more fear and disillusion to come”.
Meanwhile Wall Street is soaring in anticipation, with the Dow Jones breaking the 21,000 barrier for the first time within hours of the speech. That extra money will overwhelmingly go into the bank accounts of those with the most shares – and the May government now turns from squeezing the disabled to the bereaved, successfully passing drastic cuts in payments for which national insurance contributions had been made and raising probate fees.
*Trumpton and Mayhem: first passing reference made on Our Birmingham website by architect David Heslop, moving towards employee ownership.
Gideon Rachman in the Financial Times writes: “Although the delegates at Davos this week, fuelled by champagne and canapés, will do their utmost to pretend that it is business as usual, the fact is that the world view epitomised by the WEF is under attack as never before”.
He adds that Davos epitomises the “globalism” that the incoming US president and his political advisers are pledged to destroy.
A few days later, Martin Wolf, also in the Financial Times, opens with a reference to Davos Man – a term invented for a class of people he despised.by Samuel Huntington, the late political scientist, who attended the annual meetings of the World Economic Forum in Davos. He argued that they “have little need for national loyalty, view national boundaries as obstacles that thankfully are vanishing and see national governments as residues from the past whose only useful function is to facilitate the elite’s global operations”.
Wolof continues, “Core beliefs of the Davos creed have been global co-operation and economic globalisation. But faith in the latter was shaken after the global financial crisis of 2007-09. The ratio of trade to global economic output has stagnated since then, after doubling between the early 1970s and 2007 . . . it reflects shifts in policy: the post-crisis re-regulation of finance has had a pronounced home bias, with reduced support for cross-border activities. Trade liberalisation has stalled, while some studies already show a rise in protectionist measures . . .
The enthusiasm with which many of the elite seized opportunities to avoid paying taxes was disgraceful
“As has happened so often before, hubris led to over-reach. Davos people underplayed the role of legitimate and potent states in underpinning the global system. They forgot the need for the successful to recognise their responsibilities to the societies that had made their success possible. They ignored, above all, the obligation to share the gains of globalisation with its losers. The enthusiasm with which many of them seized opportunities to avoid paying taxes was disgraceful . . .”
Wolf warns: “Make no mistake: Mr Trump could bring down the temple of world trade. If he were to impose punitive (and unjustifiable) tariffs on Chinese imports, the EU is likely to follow suit in order to protect its producers from a surge of Chinese imports. China would then feel obliged to retaliate. The system of trade rules could collapse. So, too, could the very idea of a co-operative global system”.
He concludes: “Yes, policymakers should have paid more attention to what was happening to ordinary citizens, but the simple-minded populism now on the rise will soon prove far worse than the hubris of the Davos elite”.
Simon Zadek looks at 7 Ways to Fix the System’s Flaws by Martin Wolf
Fixing finance needs higher capital ratios, stronger oversight, and smarter consumers
But these actions leave in play perverse incentives, conflicts of interest and the entire, under-regulated shadow banking system, still repeating yesterday’s profitable errors.
Fixing inequality needs large-scale fiscal redistribution and investment in education for the poor
But does that really address the economics of inequality; how best to change a system that is increasingly delivering winner-takes-all outcomes?
Fixing power and accountability by limiting direct financing of politicians
But how does he propose to get these turkeys to vote for Christmas?
Problems Martin Wolf left off the table
1. An ever-greater visibility of those on the take.
After decades of anti-corruption measures, there is an ever-greater visibility of those on the take, flaunted cynically by politicians and businesses, in countries with mature regulations and institutions that are meant to provide oversight. Corruption in developed economies has been legalised into super-profit taking, obscene remuneration, laying-off risks on the poor, and systematic under-contributions of the rich and profitable through the tax system.
2. The environment . . . relegated to an after-thought to his economic analysis
No links appear to be seen between the state of the economy and the state of the natural ecology that sustains life on this planet. Financial markets are not doing their task of investing our money in creating a resilient, sustainable economy for current generations and those to come . . .
Disruption is tough
He concludes that such wholesale disruption – of the lives and livelihoods of one’s own family members, sponsors and friends. the inner world of international NGOs, the bureaucracies of government and international organisations – will be tough.
PCU: tough because their livelihoods would be curtailed, and even vanish, if the issues they address are resolved.
Zadek’s article may be read in full here.