Wall Street First
By Michael Hudson
March 24, 2017 "Information
Clearing House"
- Nobody yet can tell whether
Donald Trump is an agent of change
with a specific policy in mind, or
merely a catalyst heralding an as
yet undetermined turning point. His
first month in the White House saw
him melting into the Republican
mélange of corporate lobbyists.
Having promised to create jobs, his
“America First” policy looks more
like “Wall Street First.”
His cabinet of billionaires
promoting corporate tax cuts,
deregulation and dismantling
Dodd-Frank bank reform repeats the
Junk Economics promise that giving
more tax breaks to the richest One
Percent may lead them to use their
windfall to invest in creating more
jobs. What they usually do, of
course, is simply buy more property
and assets already in place.
One of the first reactions to
Trump’s election victory was for
stocks of the most crooked financial
institutions to soar, hoping for a
deregulatory scythe taken to the
public sector. Navient, the
Department of Education’s
knee-breaker on student loan
collections accused by the Consumer
Financial Protection Bureau (CFPB)
of massive fraud and overcharging,
rose from $13 to $18 after it seemed
likely that the incoming Republicans
would disable the CFPB and shine a
green light for financial fraud.
Foreclosure king Stephen Mnuchin of
IndyMac/OneWest (and formerly of
Goldman Sachs for 17 years; later a
George Soros partner) is now
Treasury Secretary – and Trump
pledged to abolish the CFPB, on the
specious logic that letting
fraudsters manage pension savings
and other investments will give
consumers and savers “broader
choice,” e.g., for the financial
equivalent of junk food.
Secretary of Education Betsy DeVos
hopes to privatize public education
into for-profit (and de-unionized)
charter schools, breaking the
teachers’ unions. This may position
Trump to become the Transformational
President that neoliberals have been
waiting for.
But not the neocons. His election
rhetoric promised to reverse
traditional U.S. interventionist
policy abroad. Making an anti-war
left run around the Democrats, he
promised to stop backing ISIS/Al
Nusra (President Obama’s “moderate”
terrorists supplied with the arms
and money that Hillary looted from
Libya), and to reverse the Obama-Clinton
administration’s New Cold War with
Russia. But the neocon coterie at
the CIA and State Department are
undercutting his proposed
rapprochement with Russia by forcing
out General Flynn for starters. It
seems doubtful that Trump will clean
them out.
Trump has called NATO obsolete, but
insists that its members increase
their spending to the stipulated 2%
of GDP — producing a windfall worth
tens of billions of dollars for U.S.
arms exporters. That is to be the
price Europe must pay if it wants to
endorse Germany’s and the Baltics’
confrontation with Russia.
Trump is sufficiently intuitive to
proclaim the euro a disaster, and he
recommends that Greece leave it. He
supports the rising nationalist
parties in Britain, France, Italy,
Greece and the Netherlands, all of
which urge withdrawal from the
eurozone – and reconciliation with
Russia instead of sanctions. In
place of the ill-fated TPP and TTIP,
Trump advocates country-by-country
trade deals favoring the United
States. Toward this end, his
designated ambassador to the
European Union, Ted Malloch, urges
the EU’s breakup. The EU is refusing
to accept him as ambassador.
Will Trump’s
victory break up the Democratic
Party?
At the time this volume is going to
press, there is no way of knowing
how successful these international
reversals will be. What is clearer
is Trump’s political impact at home.
His victory – or more accurately,
Hillary’s resounding loss and the
way she lost – has encouraged
enormous pressure for a realignment
of both parties. Regardless of what
President Trump may achieve
vis-à-vis Europe, his actions as
celebrity chaos agent may break up
U.S. politics across the political
spectrum.
The Democratic Party has lost its
ability to pose as the party of
labor and the middle class. Firmly
controlled by Wall Street and
California billionaires, the
Democratic National Committee (DNC)
strategy of identity politics
encourages any identity except that
of wage earners. The candidates
backed by the Donor Class have been
Blue Dogs who pledged to promote
Wall Street alongside neocons urging
a New Cold War with Russia.
They preferred to lose with Hillary
than to win behind Bernie Sanders.
So Trump’s electoral victory is
their legacy as well as Obama’s.
Instead of Trump’s victory
dispelling that strategy, the
Democrats are doubling down. It is
as if identity politics is all they
have.
Trying to ride on Barack Obama’s
coattails didn’t work. Promising
“hope and change,” he won by posing
as a transformational president,
leading the Democrats to control of
the White House, Senate and Congress
in 2008. Swept into office by a
national reaction against the George
Bush’s Iraq Oil War and the
junk-mortgage crisis that left the
economy debt-ridden, they had free
rein to pass whatever new laws they
chose – even a Public Option in
health care if they had wanted, or
make Wall Street banks absorb the
losses from their bad and often
fraudulent loans.
But it turned out that Obama’s role
was to prevent the changes that
voters hoped to see, and indeed that
the economy needed to recover:
financial reform, debt writedowns to
bring junk mortgages in line with
fair market prices, and throwing
crooked bankers in jail. Obama
rescued the banks, not the economy,
and turned over the Justice
Department and regulatory agencies
to his Wall Street campaign
contributors. He did not even pull
back from war in the Near East, but
extended it to Libya and Syria,
blundering into the Ukrainian coup
as well.
Having dashed the hopes of his
followers, Obama then praised his
chosen successor
Hillary Clinton as his “Third Term.”
Enjoying this kiss of death, Hillary
promised to keep up Obama’s
policies.
The straw that pushed voters over
the edge was when she asked voters,
“Aren’t you better off today than
you were eight years ago?” Who were
they going to believe: their eyes,
or Hillary’s? National income
statistics showed that only the top
5 percent of the population were
better off. All the growth in Gross
Domestic Product (GDP) during
Obama’s tenure went to them – the
Donor Class that had gained control
of the Democratic Party leadership.
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Real incomes have fallen for the
remaining 95 percent. Household
budgets have been further eroded by
soaring charges for health
insurance. (The Democratic
leadership in Congress fought tooth
and nail to block Dennis Kucinich
from introducing his Single Payer
proposal.)
No wonder most of the geographic
United States voted for change –
except for where the top 5 percent
is concentrated: in New York (Wall
Street) and California (Silicon
Valley and the military-industrial
complex). Making fun of the Obama
Administration’s slogan of “hope and
change,” Trump characterized
Hillary’s policy of continuing the
economy’s shrinkage for the 95% as
“no hope and no change.”
Identity Politics
as anti-labor politics
A new term was introduced to the
English language: Identity Politics.
Its aim is for voters to think of
themselves as separatist minorities
– women, LGBTQ, Blacks and
Hispanics. The Democrats thought
they could beat Trump by organizing
Women for Wall Street (and a New
Cold War), LGBTQ for Wall Street
(and a New Cold War), and Blacks and
Hispanics for Wall Street (and a New
Cold War). Each identity cohort was
headed by a billionaire or hedge
fund donor.
The identity that is conspicuously
excluded is the working class.
Identity politics strips away
thinking of one’s interest in terms
of having to work for a living. It
excludes voter protests against
having their monthly paycheck
stripped to pay more for health
insurance, housing and mortgage
charges or education, better working
conditions or consumer protection –
not to speak of protecting debtors.
Identity politics used to be about
three major categories: workers and
unionization, anti-war protests and
civil rights marches against racist
Jim Crow laws. These were the three
objectives of the many nationwide
demonstrations. That ended when
these movements got co-opted into
the Democratic Party. Their
reappearance in Bernie Sanders’
campaign in fact threatens to tear
the Democratic coalition apart. As
soon as the primaries were over
(duly stacked against Sanders), his
followers were made to feel
unwelcome. Hillary sought Republican
support by denouncing Sanders as
being as radical as Putin’s
Republican leadership.
In contrast to Sanders’ attempt to
convince diverse groups that they
had a common denominator in needing
jobs with decent pay – and, to
achieve that, opposing Wall Street’s
replacing the government as central
planner – the Democrats depict every
identity constituency as being
victimized by every other, setting
themselves at each other’s heels.
Clinton strategist John Podesta, for
instance, encouraged Blacks to
accuse Sanders supporters of
distracting attention from racism.
Pushing a common economic interest
between whites, Blacks, Hispanics
and LGBTQ always has been the
neoliberals’ nightmare.
No wonder they tried so hard to stop
Bernie Sanders, and are maneuvering
to keep his supporters from gaining
influence in their party.
When Trump was inaugurated on
Friday, January 20, there was no
pro-jobs or anti-war demonstration.
That presumably would have attracted
pro-Trump supporters in an
ecumenical show of force. Instead,
the Women’s March on Saturday led
even the pro-Democrat New York Times
to write a front-page article
reporting that white women were
complaining that they did not feel
welcome in the demonstration. The
message to anti-war advocates,
students and Bernie supporters was
that their economic cause was a
distraction.
The march was typically Democratic
in that its ideology did not
threaten the Donor Class. As Yves
Smith wrote on Naked Capitalism:
“the track record of
non-issue-oriented marches, no
matter how large scale, is poor,
and the status of this march as
officially sanctioned (blanket
media coverage when other
marches of hundreds of thousands
of people have been minimized,
police not tricked out in their
usual riot gear) also indicates
that the officialdom does not
see it as a threat to the status
quo.”[1]
Hillary’s loss was not blamed on her
neoliberal support for TPP or her
pro-war neocon stance, but on the
revelations of the e-mails by her
operative Podesta discussing his
dirty tricks against Bernie Sanders
(claimed to be given to Wikileaks by
Russian hackers, not a domestic DNC
leaker as Wikileaks claimed) and the
FBI investigation of her e-mail
abuses at the State Department.
Backing her supporters’ attempt to
brazen it out, the Democratic Party
has doubled down on its identity
politics, despite the fact that an
estimated 52 percent of white women
voted for Trump. After all, women do
work for wages. And that also is
what Blacks and Hispanics want – in
addition to banking that serves
their needs, not those of Wall
Street, and health care that serves
their needs, not those of the
health-insurance and pharmaceuticals
monopolies.
Bernie did not choose to run on a
third-party ticket. Evidently he
feared being accused of throwing the
election to Trump. The question is
now whether he can remake the
Democratic Party as a democratic
socialist party, or create a new
party if the Donor Class retains its
neoliberal control. It seems that he
will not make a break until he
concludes that a Socialist Party can
leave the Democrats as far back in
the dust as the Republicans left the
Whigs after 1854. He may have
underestimated his chance in 2016.
Trump’s effect on
U.S. political party realignment
During Trump’s rise to the 2016
Republican nomination it seemed that
he was more likely to break up the
Republican Party. Its leading
candidates and gurus warned that his
populist victory in the primaries
would tear the party apart. The
polls in May and June showed him
defeating Hillary Clinton easily
(but losing to Bernie Sanders). But
Republican leaders worried that he
would not support what they believed
in: namely, whatever corporate
lobbyists put in their hands to
enact and privatize.
The May/June polls showed Trump and
Clinton were the country’s two most
unpopular presidential candidates.
But whereas the Democrats maneuvered
Bernie out of the way, the
Republican Clown Car was unable to
do the same to Trump. In the end
they chose to win behind him,
expecting to control him. As for the
DNC, its Wall Street donors
preferred to lose with Hillary than
to win with Bernie.
They wanted to keep control of their
party and continue the bargain they
had made with the Republicans: The
latter would move further and
further to the right, leaving room
for Democratic neoliberals and
neocons to follow them closely, yet
still pose as the “lesser evil.”
That “centrism” is the essence of
the Clintons’ “triangulation”
strategy. It actually has been going
on for a half-century. “As Tanzanian
President Julius Nyerere quipped in
the 1960s, when he was accused by
the US of running a one-party state,
‘The United States is also a
one-party state but, with typical
American extravagance, they have two
of them’.”[2]
By 2017, voters had caught on to
this two-step game. But Hillary’s
team paid pollsters over $1 billion
to tell her (“Mirror, mirror on the
wall …”) that she was the most
popular of all. It was hubris to
imagine that she could convince the
95 Percent of the people who were
worse off under Obama to love her as
much as her East-West Coast donors
did. It was politically unrealistic
– and a reflection of her cynicism –
to imagine that raising enough money
to buy television ads would convince
working-class Republicans to vote
for her, succumbing to a Stockholm
Syndrome by thinking of themselves
as part of the 5 Percent who had
benefited from Obama’s pro-Wall
Street policies.
Hillary’s election strategy was to
make a right-wing run around Trump.
While characterizing the working
class as white racist “deplorables,”
allegedly intolerant of LBGTQ or
assertive women, she resurrected the
ghost of Joe McCarthy and accused
Trump of being “Putin’s poodle” for
proposing peace with Russia. Among
the most liberal Democrats, Paul
Krugman still leads a biweekly
charge at The New York Times that
President Trump is following
Moscow’s orders.
Saturday Night Live, Bill Maher and
MSNBC produce weekly skits that
Trump and General Flynn are Russian
puppets. A large proportion of
Democrats have bought into the fairy
tale that Trump didn’t really win
the election, but that Russian
hackers manipulated the voting
machines. No wonder George Orwell’s
1984 soared to the top of America’s
best-seller lists in February 2017
as Donald Trump was taking his oath
of office.
This propaganda paid off on February
13, when neocon public relations
succeeded in forcing the resignation
of General Flynn, whom Trump had
appointed to clean out the neocons
at the NSA and CIA. His foreign
policy initiative based on
rapprochement with Russia to create
a common front against ISIS/Al Nusra
seems to be collapsing.
Tabula Rasa
Celebrity Politics
U.S. presidential elections are no
longer much about policy. Like Obama
before him, Trump campaigned as a
rasa tabla, a vehicle for everyone
to project their hopes and fancies.
What has all but disappeared is the
past century’s idea of politics as a
struggle between labor and capital,
democracy vs. oligarchy.
Who
would have expected even half a
century ago that American politics
would become so post-modern that the
idea of class conflict has all but
disappeared. Classical economic
discourse has been drowned out by
junk economics.
There is a covert economic program,
to be sure, and it is bipartisan. It
is to make elections about just
which celebrities will introduce
neoliberal economic policies with
the most convincing patter talk.
That is the essence of rasa tabla
politics.
Can the Democrats
lose again in 2020?
Trump’s November victory showed that
voters found him to be the Lesser
Evil, but all that voters really
could express was “throw out the
bums” and get a new set of lobbyists
for the FIRE sector and corporate
monopolists. Both candidates
represented Goldman Sachs and Wall
Street. No wonder voter turnout has
continued to plunge.
Although the Democrats’ Lesser Evil
argument lost to the Republicans in
2016, the neoliberals in control of
the DNC found the absence of a
progressive economic program to less
threatening to their interests than
the critique of Wall Street and
neocon interventionism coming from
the Sanders camp. So the Democrat
will continue to pose as the Lesser
Evil party not really in terms of
policy, but simply ad hominum. They
will merely repeat Hillary’s
campaign stance: They are not Trump.
Their parades and street
demonstrations since his
inauguration have not come out for
any economic policy.
On Friday, February 10, the party’s
Democratic Policy group held a
retreat for its members in
Baltimore. Third Way “centrists”
(Republicans running as Democrats)
dominated, with Hillary operatives
in charge. The conclusion was that
no party policy was needed at all.
“President Trump is a better
recruitment tool for us than a
central campaign issue,’ said
Washington Rep. Denny Heck, who
is leading recruitment for the
Democratic Congressional
Campaign Committee (DCCC).”[3]
But what does their party leadership
have to offer women, Blacks and
Hispanics in the way of employment,
more affordable health care, housing
or education and better pay? Where
are the New Deal pro-labor,
pro-regulatory roots of bygone days?
The party leadership is unwilling to
admit that Trump’s message about
protecting jobs and opposing the TPP
played a role in his election.
Hillary was suspected of supporting
it as “the gold standard” of trade
deals, and Obama had made the
Trans-Pacific Partnership the
centerpiece of his presidency – the
free-trade TPP and TTIP that would
have taken economic regulatory
policy out of the hands of
government and given it to
corporations.
Instead of accepting even Sanders’
centrist-left stance, the Democrats’
strategy was to tar Trump as
pro-Russian, insisting his aides had
committed impeachable offenses, and
mount one parade after another.
“Rep. Marcia Fudge of Ohio told
reporters she was wary of focusing
solely on an “economic message”
aimed at voters whom Trump won over
in 2016, because, in her view, Trump
did not win on an economic message.
“What Donald Trump did was address
them at a very different level — an
emotional level, a racial level, a
fear level,” she said. “If all we
talk about is the economic message,
we’re not going to win.”[4]
This stance led Sanders supporters
to walk out of a meeting organized
by the “centrist” Third Way think
tank on Wednesday, February 8.
By now this is an old story. Fifty
years ago, socialists such as
Michael Harrington asked why union
members and progressives still
imagined that they had to work
through the Democratic Party. It has
taken the rest of the country half a
century to see that Democrats are
not the party of the working class,
unions, middle class, farmers or
debtors. They are the party of Wall
Street privatizers, bank
deregulators, neocons and the
military-industrial complex. Obama
showed his hand – and that of his
party – in his passionate attempt to
ram through the corporatist TPP
treaty that would have enabled
corporations to sue governments for
any costs imposed by public consumer
protection, environmental protection
or other protection of the
population against financialized
corporate monopolies.
Against this backdrop, Trump’s
promises and indeed his worldview
seem quixotic. The picture of
America’s future he has painted
seems unattainable within the
foreseeable future. It is too late
to bring manufacturing back to the
United States, because corporations
already have shifted their supply
nodes abroad, and too much U.S.
infrastructure has been dismantled.
There can’t be a high-speed
railroad, because it would take more
than four years to get the
right-of-way and create a route
without crossing gates or sharp
curves. In any case, the role of
railroads and other transportation
has been to increase real estate
prices along the routes. But in this
case, real estate would be torn down
– and having a high-speed rail does
not increase land values.
The stock market has soared to new
heights, anticipating lower taxes on
corporate profits and a deregulation
of consumer, labor and environmental
protection. Trump may end up as
America’s Boris Yeltsin, protecting
U.S. oligarchs (not that Hillary
would have been different, merely
cloaked in a more colorful identity
rainbow). The U.S. economy is in for
Shock Therapy. Voters should look to
Greece to get a taste of the future
in this scenario.
Without a coherent response to
neoliberalism, Trump’s billionaire
cabinet may do to the United States
what neoliberals in the Clinton
administration did to Russia after
1991: tear out all the checks and
balances, and turn public wealth
over to insiders and oligarchs. So
Trump’s best chance to be
transformative is simply to be
America’s Yeltsin for his party’s
oligarchic backers, putting the
class war back in business.
What a truly
transformative president would
do/would have done
No administration can create a sound
U.S. recovery without dealing with
the problem that caused the 2008
crisis in the first place:
over-indebtedness. The only one way
to restore growth, raise living
standards and make the economy
competitive again is a debt
writedown. But that is not yet on
the political horizon. Obama’s
doublecross of his voters in 2009
prevented the needed policy from
occurring. Having missed this chance
in the last financial crisis, a
progressive policy must await yet
another crisis. But so far, no
political party is preparing a
program to juxtapose the
Republican-Democratic austerity and
scale-back of Social Security,
Medicare and social spending
programs.
Also no longer on the horizon is a
more progressive income tax, or a
public option for health care – or
for banking, or consumer protection
against financial fraud, or for a
$15-an-hour minimum wage, or for a
revived protection of labor’s right
to unionize. Or environmental
regulations.
It seems that only a new party can
achieve these aims. At the time
these essays are going to press,
Sanders has committed himself to
working within the Democratic Party.
But that stance is based on his
assumption that somehow he can
recruit enough activists to take
over the party from Its Donor Class.
I suspect he will fail. In any case,
it is easier to begin afresh than to
try to re-design a party (or any
institution) dominated by resistance
to change, and whose idea of
economic growth is a pastiche of tax
cuts and deregulation. Both U.S.
parties are committed to this
neoliberal program – and seek to
blame foreign enemies for the fact
that its effect is to continue
squeezing living standards and
bloating the financial sector.
If this slow but inexorable crash
does lead to a political crisis, it
looks like the Republicans may
succeed in convening a new
Constitutional Convention (many
states already have approved this)
to lock the United States into a
corporatist neoliberal world. Its
slogan will be that of Margaret
Thatcher: TINA – There Is No
Alternative.
And who is to disagree? As Trotsky
said, fascism is the result of the
failure of the left to provide an
alternative.
Michael
Hudson is President of The Institute
for the Study of Long-Term Economic
Trends (ISLET), a Wall Street
Financial Analyst, Distinguished
Research Professor of Economics at
the University of Missouri, Kansas
City and author of
J is Junk Economics
(2017),
Killing the Host (2015), The
Bubble and Beyond
(2012),
Super-Imperialism: The Economic
Strategy of American Empire (1968 &
2003), Trade, Development and
Foreign Debt (1992 & 2009) and of
The Myth of Aid (1971), amongst
many others.
Footnotes
