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Trumpton and Mayhem 2*: Trump – like May – takes care of the rich, not the rust belt

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.

 

 

 

 

Davos 2: Will simple-minded populism prove far worse than the hubris of the elite”?

davos2

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”.

 

 

 

Will future generations curse our indifference?

Yesterday, ‘An unethical bet in the climate casino’, by Martin Wolf, was published in the Financial Times. Wolf believes that the Republican victory in the mid-term elections will have big implications for the future of the US and the rest of humanity.

The US is the world’s second-largest emitter of greenhouse gases and among the highest emitters per head and Wolf thinks that “the most important consequence of this election may therefore be to bury what little hope remained of getting to grips with the risk of dangerous climate change”.

US executes world

A truism: ‘countries cannot keep bits of the atmosphere to themselves’ – moving off the world’s current trajectory is a collective task. Without US will and technological resources, the needed shift will not happen. Other countries will not – indeed cannot – compensate.

Many Republicans seem to have concluded man-made climate change is a hoax. If so, this is quite a hoax. Just read the synthesis report of the  Intergovernmental Panel on Climate Change. One is asked to imagine that thousands of scientists have put together a complex fabrication in order to promote their not particularly remunerative careers, in the near certainty they will be found out. This hypothesis makes no sense.

After summarising some of its findings, Wolf continues:

“If we continue on our path, the report adds, larger changes in climate are highly likely. The equilibrium rise in global average surface temperatures caused by a doubling of carbon dioxide concentrations relative to pre-industrial levels would be between 1.5C and 4.5C. But the concentrations of greenhouse gases have already risen by more than 40%. Likely consequences of further rises include disease, extreme weather, food and water insecurity and loss of biodiversity and valuable ecosystems”.

He sees no indication that humanity will move off the path towards ever greater emissions, with potentially huge and irreversible consequence.

Indifference to the fate of future generations

Those standing in the way of mitigating the effects of climate change and reducing the emission of green house gases are accused of indifference to the fate of future generations:

“Why should we bear costs of mitigation today for the benefit of those we will never know, even if that includes our own descendants? After all, the indifferent might ask, what have future generations ever done for us?

A strong moral argument, unlikely to prevail, Wolf:

“The ethical response is that we are the beneficiaries of the efforts of our ancestors to leave a better world than the one they inherited. We have the same obligation even if, in this case, the challenge is so complex.

“But, however strong such a moral argument may be, it is most unlikely to overcome the inertia we now see.

“Future generations, and even many of today’s young, might curse our indifference. But we do not care, do we? “

martin.wolf@ft.com

STOP PRESS:

Will Mr Wolf be reassured by the APEC Obama climate change agreement with Chinese President Xi Jinping that would cut both countries’ greenhouse gas emissions by close to a third over the next two decades?

Anglo-Saxon inequality: a moral, political and economic question

us inequality

In the FT, economist Martin Wolf observes that the US – both the most important high-income economy and much the most unequal – is providing a test bed for the economic impact of inequality. The results are worrying. This realisation has now spread to institutions that would not normally be accused of socialism. A report written by the chief US economist of Standard & Poor’s, and another from Morgan Stanley, agree that inequality is not only rising but having damaging effects on the US economy.

Wolf asks: “When should growing inequality concern us? This is a moral and political question. It is also an economic one. It is increasingly recognised that, beyond a certain point, inequality will be a source of significant economic ills.

According to the Federal Reserve, the upper 3% of the income distribution received 30.5% of total incomes in 2013. The next 7% received just 16.8%. This left barely over half of total incomes to the remaining 90%t. The upper 3% was also the only group to have enjoyed a rising share in incomes since the early 1990s. Since 2010, median family incomes fell, while the mean rose. Inequality keeps rising. The Morgan Stanley study lists among causes of the rise in inequality: the growing proportion of poorly paid and insecure low-skilled jobs; the rising wage premium for educated people; and the fact that tax and spending policies are less redistributive than they used to be a few decades ago”.

supreme court decision 2014In March, an FT article by Edward Luce (America’s democracy is fit for the 1%) was subtitled ‘Both US parties are up for rent, and patriots of all stripes should be troubled’. He correctly forecast that the US Supreme Court would remove what remains of post-Watergate limits on campaign finance. In April it did so. He commented that “in a less unequal society, the downside would be limited. But in an economy where the top 1% of the population owns more than a third of national wealth, it corrodes the republic from which such riches sprung. People fret about America’s 1% economy. They should worry more about its 1% democracy.

Both ends of the spectrum should be concerned about the rising US oligarchy. Last week several Republican presidential hopefuls trekked to Las Vegas to pay their respects to Sheldon Adelson, the gaming billionaire, who owns casinos in Nevada, Macau and Singapore . . .

Wolf continues “The transmission of educational disadvantages across the generations is also a growing handicap to the economy. A debt-addicted economy with stagnant levels of education is likely to fare ill in future . . .

“American education has also deteriorated. It is the only high-income country whose 25-34 year olds are no better educated than its 55-64 year olds. This is partly because other countries have caught up on the US, which pioneered mass college education. It is also because children from poor backgrounds are handicapped in completing college . . .

“This is not just a problem for those whose talents are not fulfilled. The failure to raise educational standards is also likely to impair the economy’s longer-term success. Some of the returns to education may just be the reward to obtaining a positional good: the educated do better because they have won a zero-sum race. Yet a better educated population would also raise everybody to a higher level of prosperity.

“The costs to society of rising inequality go further. To my mind, the greatest costs are the erosion of the republican ideal of shared citizenship. As the US Supreme Court seeks to bend the constitution to the will of plutocrats, the peril is to the politically egalitarian premises of the republic. Enormous divergences in wealth and power have hollowed out republics before now. They could well do so in our age”.

Ed: and this analysis ‘writ small” applies to England.

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Fixing the system’s flaws: including the ever-greater visibility of those on the take

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.

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Zadek’s article may be read in full here.

Are ‘financial and corporate inmates running the political asylum’?

Will politicians who ‘demonstrate fealty to and ownership by’ their corporate paymasters enact rational solutions?

In the FT, American lawyer John E. Hemington, states firmly that Martin Wolf – its chief economics commentator – makes a mistake common to almost everyone proposing rational solutions to intractable problems:

“Thousands upon thousands of similar solutions have been offered by highly respectable and competent individuals over the years. Yet absent an accompanying means for implementation, they represent little, if anything, useful.”

Reasons for non-implementation

“Here in the US, as in Europe, the dominant politico-economic culture is almost entirely corrupt, with the financial and corporate inmates running the political asylum. The politicians who must enact the laws necessary to carry out the recommended changes have demonstrated time and time again their fealty to and ownership by those who pay their campaign expenses and reward them handsomely should they eventually leave office.

“How is it, then, that these essential changes come to be enacted? It is certainly not in the interest of the politicians’ current paymasters to see these reforms placed into law.”

“This ultimate issue is almost never addressed. It is not just what needs to be done; it is how the necessary reforms shall be undertaken. Until that question is addressed, all other recommendations are simply empty rhetoric. It would be refreshing to hear from some of your expert commentators just how this shall be accomplished.” 

John E. Hemington, McMurray, PA, US