Donald Johnston and his Hairy Twin, Donald Trump

Donald Johnston and his Hairy Twin, Donald Trump

by

Howard Adelman

Donald J. Johnston (2017) Missing the Tide: Global Governments in Retreat, McGill-Queens University Press.

The evening before last, I attended a book launch at Massey College of Donald J. Johnston’s new book chastising the international community for missing the opportunities over the last quarter of a century and for failing to take advantage of unprecedented opportunities to significantly advance both global social and economic progress. The book is a lamentation with a very loud wail. For there were many opportunities, Johnston argued. ALL were missed. It is also a paean, not so much to freedom from the classical laws of economics, but a cri de coeur to impose an ethical regime in control of the economic realm.

That regime required offsetting any rise of a monolithic dominant state in favour of a newborn vision of a balance of power among states using the leverage of international institutions, but without any international agreed-upon economic standard, such as the now ancient international gold standard. The “self-regulating market” with its unprecedented record of wealth creation had to be wedded to national and international political regulation which had produced “unheard-of material welfare.”  Johnston want to update the moral economics of Karl Polanyi, but with a full acceptance of the market without its neo-classical lack of moral boundaries.

For Johnston, global free trade is in retreat and, with it, the chance to extend increased prosperity to the developing world. Further, since both economic growth and social cohesion rest on a foundation of proper respect for mother earth that provides the wherewithal for both prosperity and social cohesion, the failure to adequately reduce the dangers of climate change may be the most serious missed opportunity.

Thus, the wreckage is economic. The wreckage is social. And the wreckage is environmental. But Donald Johnston is both a small “l” and a large “L” liberal and Liberal. If you do not know who he is, chances are that you have not yet reached your sixtieth birthday. In 2008, the Honourable Donald J. Johnston could add OC after his name for he was made an Officer of the Order of Canada, both for his contributions to public service within in Canada and as the first non-European secretary general of the Organization for Economic Cooperation and Development (OECD), a position he held for ten years from 1996 to 2006, just before the great economic crash of 2007-08. He not only played a signal role in those so-called missed opportunities, but had a bird’s eye view of what happened in that fateful decade.

Further, he came to that position with enormous accomplishments behind him – as a gold medalist in law from McGill in 1958, as a founding partner of the legal firm, Heenan Blaikie, in 1964, where he worked alongside my next door neighbour, also a tax and business law specialist. Johnston was first elected to the Canadian Parliament in 1978 and quickly assumed a place in the sun as President of the Treasury Board, Minister of State for Science and Technology and subsequently for Economic and Regional Development. In addition to these positions between 1980 and 1984 in the Trudeau government, he was named Minister of Justice and Attorney General in the short-lived Turner Liberal government. For, if you are old enough, you might best remember him as the candidate who ran third in the leadership race behind John Turner and Jean Chrétien in 1984 and then broke ranks when his friend and colleague, John Turner, then leader of the opposition, opposed Brian Mulroney on free trade, specifically the Canada-U.S. free trade agreement, but supported the PCs on the Meech Lake Accord. Johnston supported free trade and opposed Meech; he resigned from caucus and became an independent Liberal.

However, it is for his term as OECD Secretary-General that he will be best known. What a bird’s eye view! What an opportunity to influence the direction of history! But if you are looking for an account of his failure, forget it. For the failures were not his. They were the international community’s. There was George W. Bush’s misbegotten invasion of Iraq which initiated the undermining of the U.S. as the world’s leader with the initiation of positions and policies that were frugal on truth, disrespectful of science, expansive on pride and hubris, and thoroughly permeated by corruption and a disrespect for the small “l” liberal values of human rights.

From reading Johnston’s book, the politics of salesmanship, once slick versus the current display of vulgarity, the economics of favouring the 1% and ignoring the well-being of the remainder, promoting the military and foreign adventurism while undermining the welfare needed to hold society together, began much earlier than the ascension of Donald Trump as President. If the slick version of chicanery missed the opportunity to make Russia a full partner in liberal progress, the contemporary much crasser version is nostalgic with its outreach to a kleptocratic and autocratic Russia.

In the nineteenth century, the poor were severed both from the land and their access to charity. Trump will strip them of any possibility of realizing the dream of home ownership and, at the same time, of any right to access state welfare while promising the opposite.  In contrast, for Johnston, good governance on both the national and international level was and remains needed as an offset of once vibrant communities of reciprocity.

What happened? The U.S. was only ostensibly a proponent of free trade, but actually promoted bilateral trade and investment agreements, the forerunner of Trump’s policies without his frank openness. Why did this happen? Because the U.S. was a behemoth which operated to promote its own advantage. (p. 11) Why take on the Lilliputians collectively when you could pick them off one at a time? However, if that is the explanation – the inevitability of the exercise of uneven power – why declaim opportunities missed? If that norm was truly a universal law of behaviour, then there were really no opportunities. It was all a chimera.

Therein lies the contradiction. Forces are at work that overwhelm the liberal agenda of uniting economic growth and wealth creation with policies promoting social stability and cohesion through good governance at the top and a respect for nature at the base. The laws of “power corrupts and absolute power corrupts absolutely” were reinforced by national predispositions. “Americans would never (my italics) accept the taxation levels of many European countries where there is a cultural tolerance for higher taxation to support public funding for education, health, and social safety nets.” (p. 14) But that meant the trajectory in the U.S. would always favour the rich at the expense of the middle and under class and would need foreign adventures to distract the populace through patriotic appeals and circuses.

The book is permeated with various versions of this contradiction between the inevitable power of social forces and the faith in choice and taking advantage of opportunities to forge what my son, the Henry Charles Lea Professor of History and Director of the Global History Lab at Princeton University, calls the doctrine of moral economics, which he identifies with Karl Polanyi. (See Jeremy Adelman, “Polanyi, the Failed Prophet of Moral Economics,” Boston Review, 30 May 2017.) The connection need not be inferred. It is totally evident in the accomplishments at the OECD for which Johnston is lauded: establishing the world standard for the Principles of Corporate Governance, the revised Guidelines for Multinational Enterprises enunciating the norms of corporate social responsibility,  correcting harmful international tax practices; the international harmonization of competition policy, fostering sustainable development, and, as well, establishing the Education Directorate and the Program of International Student Assessment (PISA) for assessing educational comparisons. For unlike Karl Polanyi, an intellectual father, Johnston strove to institutionalize morality and not leave it as a moral cloud haunting the economic market.

Without apology or any self-critical analysis, Johnston was and remains a champion of one version of Polanyi’s moral economics and moral norms, that in both their moral and institutionalized iterations proved to be as weak a barrier to the floods produced by raw capitalism as the levees that promised to hold back the waters of the Gulf of Mexico in Hurricane Katrina from drowning New Orleans. For a number of years, I used Karl Polanyi’s classic, The Great Transformation: The Political and Economic Origins of Our Times (1944) in the general education courses that I taught at York University. As it turned out, it was my marked-up copy that Jeremy used in writing his article.

As Jeremy writes, Polanyi’s book is a “sacred text” for liberals unable to stomach the laws of inevitability espoused by both Marxists, on the one hand, and the worshippers of untrammeled markets and the invisible hand, on the other hand. Could liberalism counter “the iron broom of the classical economists”? He wrote a sacred text against a background when capitalism met its most profound economic crisis of the twentieth century, the Great Depression, and its most horrific political crisis, the rise of populist Nazism with its accompanying antisemitism in Europe.

Like Polanyi, Johnston is an “ethical stepchild of nineteenth-century liberalism, quick to condemn its shortfalls and determined to create a new moral order without the odor of Marxist class conflict.” However, unlike Polanyi, Johnston wanted to embed economic moralism in international institutions, for he accepted rather than rejected the globalization of consumption. Polanyi was a Puritan; Johnston is an Anglican or Episcopalian, at least in the secular economic religion. The market was not just a source of plutocratic enrichment at the expense of workers. It was the arena for creating wealth and it had to be tamed by rules and umpires and not treated as a circus for distraction.

Thus, Johnston’s book is timely and is part of a revivalist movement to beat back “the era of walls, visas, Eurofatigue, and slumping global trade.” He offers a moral counterpoint. Johnston writes about using good (my italics) governance to ensure the transfer of the benefits of growth to society as a whole. Could the OECD serve as an offset to the cult of stable money which was administered by states under a doctrine of state sovereignty, but where the forces at work lay “outside national boundaries, beyond the reach of community regulators”? Polanyi argued that markets had to be “embedded” within social norms to ensure the benefits served communal purposes.

I have written previously about the role of assimilated Jews who tried to address current economic and political issues with the moral lessons of the Torah, but where the Torah was only a silken thread connecting these modern “protestants” to their historic roots. Today is Shavuot that celebrates God’s giving of the Torah on Mount Sinai. Since I did not stay up this year to study Torah all night, it is convenient to refer to Julie Nathan’s essay, “The Gift of the Law: Civilisation, Shavuot and the Hatred of the Jews” (Religion and Ethics, 29 May 2017) Nathan wrote that the Jewish nation, which has had a lasting influence and impact on the human heart and mind rather than its institutions, unlike the great civilizations of the ancient world that grew up along major waterways,  “did not develop along a major river or amid lush vegetation, but was born in an arid desert, in a no-man’s land, and was founded not by kings and conquerors but by pastoral nomads and runaway slaves.” Polanyi may have left his shtetl Judaism behind, but he carried forward its emphasis on ideas, on values, on ethics and on laws to serve as a vision for humanity, but in a Christian form.

Look at Polanyi’s norms: human brotherhood, the sanctity of life, respect for individual dignity, the role of conscience, the upholding of social responsibility, respect for human rights, equality before the law, and a vision of the world guided by justice in pursuit of peace. Jeremy was named after Jeremiah, the prophet of peace.  Nations “shall beat their swords into ploughshares and their spears into pruning hooks. Nation shall not take up sword against nation. They shall never again know war” (Isaiah 2:4). More generally, “Justice, justice shall you pursue” (Deuteronomy 16:20) and, “Love your neighbour [and] the stranger as yourself” (Leviticus 19:18, 19:34)

These were the values of Karl Polanyi. These remain the basic values of Donald Johnston. For Nathan, “Jews are targeted because they are the bearers of these values, the living affirmation of a universal message of a humanitarian and ethical world. Will Donald Johnston also be reproved for trying to revive this ancient message? Or will he be ignored and his analysis relegated to the dust heap of history because it fails to engage self-critically to truly understand why those norms could not succeed against the forces of Mammon?

Assimilated Jews cast adrift from their moral bearings, tried to resurrect and concretize them in international institutions. Donald Johnston, an archetypal WASP and visionary Canadian, emerges as an honorary Jew. As Larry Zolf used to say, “When you are in love, the whole world is Jewish.” Alternatively, one could be Jewish like Polanyi who eschewed knowledge of his origins and opted for resurrection without history. Polanyi claimed that Jews “were guilty, not for the death of Jesus, but for ‘rejecting the teachings of 4520885018036092Jesus, which are superior’.” Polanyi championed a new Christian unity superimposed on free markets and expressing the importance of a political balance, in the Aristotelian sense, set in place by these overarching values.

This is self-evidently a romantic view of Judaism and of the world. Polanyi was an heir to that romanticism. Whereas, both are proselytizers of a sacred secular economic and political religion wherein liberals in a confessional mode flagellate themselves for the failures of their liberalism, Johnston is an Orthodox rabbi in comparison. But both were blind to the real dangers of populist nationalism. “Now, will the Trump administration correct this crumbling once-great democracy or will it, like others, be seduced by the extraordinary wealth of some Americans instead of being motivated to address the poverty and disillusionment of millions who supported Trump?” (p. 16) To even pose this as a question, to even ask whether Trump and Trumpism will be seduced by money, to even hold out the possibility that Trump will convert to the religion of economic moralism, is to expose the emptiness of this economic dream world and suggest why it stood powerless in the face of opposing forces.

Further, there is a failure to grasp Trump’s policies of railing against currency manipulation, implicitly favouring managed currencies, his national protectionism opposed to globalized economic forces, and make-work in industries such as coal mining. All these policies merely demonstrate that Trump, rather than Johnston, was not the usurper of Johnston’s birthright, but rather the true wished-for heir of the small “l” liberal tradition, Jacob (Johnston) longed to steal the birthright of Esau (Bush/Trump), but without Jacob’s mother’s wile. Polanyi was Johnston’s intellectual father, but Trump was the natural heir, not moral economic globalism embedded in institutions.

Johnston ends with this assertion, “I think it will happen.” It reveals the triumph of hope over reality, belief over facts, faith over skepticism, in fact, the very same foundation of charlatan Trumpism’s cynical evangelism based on faith rather than truth, founded on a lavish lifestyle, the Benny Hinn of American secularism. As Jeremy asked, is the search for the middle but a cover for the intellectual, economic and political misery of a muddle?

Lamentations focus on the gore of history. Charlatans nostalgically appeal to past glory. But both were conceived in the same womb.

To be continued.

With the help of Alex Zisman

 

 

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Reflections on the Trump Overseas Tour

Reflections on the Trump Overseas Tour

by

Howard Adelman

My overall impression of Donald Trump’s first excursion overseas as President is the low standard American commentators have set for their President. Further, Trump has surrendered American leadership in the world, although the focus has been on whether his visits to Saudi Arabia, Israel, the Vatican and the G7 were far less damaging than expected.  I examine the trip thus far one stop at a time.

Saudi Arabia

The glitz was familiar. Friendships were forged and solidified. The dancing at the ardha ceremony on the part of the Americans was awkward, and that may have been the metaphor for the whole visit. At the same time, a number of issues came into sharper focus.

  1. Donald’s supreme ignorance concerning terrorism

Though Trump declared that the war against terror was not a war of one civilization against another or one religion against another, but a war against evil, Iran alone was blamed as the heinous source of terrorism, as “the tip of the spear of global terrorism.” To some extent, in the Middle East, the country is a prime source. However, most radical Islamicist terrorism in Europe, in North America and even in the Middle East, is a product of Sunni, not Shiite, background. Wahhabism, rooted in Saudi Arabia, is both a source of proselytizing as well as repression, though both merge together in terrorism in only a small proportion of adherents to this fundamentalism. ISIS in its theology and jurisprudence is far closer to Saudi Arabia than to Iran.

  1. Donald proved he could be diplomatic

He learned to follow Barack Obama’s lead, a lead at which he once aimed withering criticism, and avoided the phrase “Islamic terrorism.” He also deliberately ignored his anti-Islamic rhetoric in addressing Muslim leaders and conveniently forgot that he had once declared that Muslims hate us.

  1. Donald’s Respect for Democracy

Saudi Arabia is a dynasty and theocracy, permitting only male descendants of the founder, King Abdulaziz bin Abdulrahman al-Saud, to rule. Further, the Basic Law that dictates a dictatorship is rooted in sharia law; punishment can be severe for apostasy, sorcery and adultery. Trump could have offered indirect criticisms of the Saudi democratic deficit by applauding the honesty of its December 2016 elections and the innovation in allowing women to both vote and run as candidates, while urging moves towards further reform. If he had a deeper sense of diplomacy than he exhibited, this need not have emerged as a scolding, but as encouragement towards judicial independence and due process in opposition to rampant use of arbitrary arrest, particularly targeting human rights activists. However, Donald Trump’s “principled realism” unveiled an absence of any principles.

  1. Donald’s Ethos

Donald seems to have no sense of human rights – freedom of speech, freedom of assembly – and universal values; he expresses a positive disdain for them in the leaders he admires. He never once brought up the issue of human rights or confronted the repressive government of the Saudis. Instead, a member of his executive, Secretary Wilbur Ross, lauded his visit to Saudi Arabia by noting there were no protesters. “There was not a single hint of a protester anywhere there during the whole time we were there. Not one guy with a bad placard.” When Ross was offered an option to amend or qualify the statement, he abjured and, instead, doubled down on the plaudits he awarded Saudi Arabia without reference to the authoritarian reasons.

(See the U.S. Government Report: https://www.state.gov/documents/organization/253157.pdf)

This State Department Report explicitly notes that, “the [Saudi] government categorically forbids participation in political protests or unauthorized public assemblies.” Two protesters currently sit on death row sentenced to be beheaded.

  1. Donald’s Economic Interests

While the billions in trade deals (selling billions of dollars in arms to the Saudis whom he once charged with masterminding 9/11) were being celebrated, so was Saudi investments in America – $55 billion in defence, manufacturing and resource companies. Sales and investments also promised to bring more jobs to America. Less apparent was the fact that a close associate of Donald Trump, Hussain Sajwani, whose DAMAC Properties built the Trump International Golf Course Dubai, might be a big beneficiary.

  1. Saudi Middle East Peace Plan

Though the fifteen-year-old Saudi-led plan for peace between Israel and the Palestinians had previously led nowhere, there were hints that the Saudis had modified their approach by offering Israeli recognition as well as trade and investment cooperation if Israel took positive steps towards peace – freezing settlements, releasing prisoners. The increasing surreptitious cooperation between Israel and Saudi Arabia in trade, security and even diplomacy has, in fact, provided the possibility of making the current period propitious for an advance toward peace, however unlikely that seems to be.

Israel and the Palestinians

At this time, virtually no one with any in-depth knowledge of the Israeli-Palestinian conflict expects any breakthrough on the conflict. This is especially true of the Palestinians. Some still believe that Palestinian stubbornness on the “right of return” is a, if not the, major impediment. In fact, there is a deal in the backdrop which allows Israel to ensure its demographic Jewish majority while giving a nod to Palestinian honour. Since there are agreements in place for trading territory and various resolutions are thrown about in dealing with the 80,000 Jewish settlers outside Area C in the West Bank, the problem of Jerusalem as the undivided capital of Israel versus East Jerusalem serving as a capital of a Palestinian state still seems insurmountable. Could that problem be bracketed and a peace deal agreed upon on the other issues?

  1. Orthodox Jews were already suspicious when an unknown rabbi purportedly gave permission to Ivanka Trump and Jared Kushner landing in Saudi Arabia after the sun had set for the beginning of shabat.
  2. Donald Trump arrived in Israel against a background in Washington where he let the Russians know that intelligence had come from Israel.
  3. Former MK Moshe Feiglin, former leader of Zehut, criticized the $110 billion dollar-weapons-deal signed by Donald with Saudi Arabia.
  4. Netanyahu had to order his ministers to meet Trump at the airport; extreme right wing members recognized that they could not win Trump’s endorsement for a one-state solution based on Israeli victory.
  5. Netanyahu welcomed Trump to the “united capital of the Jewish state.”
  6. Donald Trump, whatever the huge range of his ignorance and inadequacies, does have a keen ear for identity politics and an ability to appeal to that side of Palestinian political concerns. In the past, efforts to strike a deal based on Palestinian self interest have failed. Would Donald be able appeal to their identity concerns?
  7. Recall that in February, Trump suggested that he, and the U.S., were no longer wedded to a two-state solution, even as the State Department reaffirmed that the U.S. still supported a two-state solution. Only a bare majority of Israelis continued to support a two-state solution and the support among Palestinians had dropped to 44%. However, it was not clear whether Trump had dumped the two-state solution or whether he was holding out that possibility if the Palestinians refused to bend and compromise. In his dealings with Israel, he was much clearer that he continued, for the present, to support a two-state solution, but it was also clear that it would not be based on a return to the Green Armistice Line, though Trump disdained the use of a label to characterize the solution without clarification of any content.
  8. When Donald Trump went to Bethlehem to meet Mahmud Abbas, he was greeted with a banner declaring Trump to be a man of peace: “the city of peace welcomes the man of peace.”
  9. Donald Trump did urge Palestinians to refrain from inciting violence.
  10. Trump broke a taboo and flew directly from Riyadh to Tel Aviv.
  11. Trump broke another taboo and, as U.S. President, visited the Western Wall in the Old City of Jerusalem, but without any Israeli politicians.
  12. He also reinforced Netanyahu’s propensity to demonize Iran as Trump insisted that Iran would never be allowed to make nuclear arms in the same week that a relative moderate, Hassan Rouhani, had just been re-elected as President of Iran.
  13. On the other hand, Trump did not announce moving the U.S. embassy to Jerusalem as he had promised.
  14. Further, Trump asked Netanyahu to “curb” settlement expansion, but did not ask for a freeze on building housing units in existing settlements.

The Vatican

  1. Instead of building bridges, as Pope Francis favoured, the Pope had criticized Trump’s promise to build a wall on the Mexican border during his campaign.
  2. Trump in return had called Francis “disgraceful.”
  3. Pope Francis, a critic of climate change sceptics, openly advocated adopting policies to deal with climate change. (Francis gave Trump a copy of his encyclical on preserving the environment – of course, there is little possibility that Trump will read it).
  4. Francis is also perhaps the best-known world figure who identifies with giving a helping hand to the poor, with compassion for refugees and, in a Ted talk, he had urged the powerful to put the needs of the people ahead of profits and products.
  5. Francis and Trump did not end up in fisticuffs, but the half-hour visit appeared to be a downer for the Donald and certainly for Sean Spicer, a Catholic, who never got to meet the Pope; the background of the Manchester terror attack did not help, though Trump is all sentiment when children are killed and riled up when terrorists do the killing.

Brussels

  1. The visit to the heartland of globalism was bound to depress the Donald, especially when the UK placed a curb on sharing intelligence with the U.S. since Washington leaks could have compromised the investigation of the Manchester terror attack.
  2. The release of the CPO discussed yesterday did not help.
  3. Donald lectured other members of NATO – totally ignoring the progress made towards the 2% of GDP to be dedicated to the military; he claimed other members owed “massive amounts”; “23 of the 28 member nations are still not paying what they should be paying and what they are supposed to be paying.”
  4. The combination of ignorance and bravado earned some open sniggers from a few European leaders but more frowns.
  5. Donald did not say that NATO was obsolete or dysfunctional, but neither did he pledge America’s unconditional fealty to NATO as required under Article 5 dealing with collective defence and the requirement that each member come to the defence of another.
  6. Donald was mostly left to wallow in his depressed isolation.

The G7

  1. At the G7, Trump lost the control he had exhibited in the Middle East and even Rome.
  2. It is difficult to say whether this was because of events back in Washington – John Brennan’s testimony that there definitely was Russian interference in the election and “possible” collusion because of Trump campaign officials contacts with the Russians, the breaking news of Trump possible obstruction of a criminal probe when he urged his intelligence chiefs to announce that there was no evidence of collusion, and the continuing parade of information that the Trump budget would be disastrous for Trump’s working class white supporters, or whether it was a result of events at the G7, or some combination thereof.
  3. First, while Trump refused to commit to the Paris Accord on the environment, he bragged that he won two environmental awards. And he did – for soil erosion control and preserving a bird sanctuary on one of his golf courses and for donating park land to New York State. Donald did not add that the first on the golf course complemented his self interest and the second was a way to get a charitable donation for land on which he was refused permission to build a golf course. Further, as one drives on the Taconic State Parkway through Westchester, you are greeted with large signs advertising the approach to Donald J. Trump State Park, but one finds the park is small (436 acres of woods and wetlands) relative to the signs, lacks any amenities – trails, parking, washrooms and picnic areas – and is uncared for (overgrown pathways and buildings deteriorated and covered with graffiti) since Trump never donated the money needed for its maintenance.
  4. President Xi of China told Trump that the U.S. withdrawal from the Paris Accord would be irresponsible.
  5. Was America’s pledge to commit $2 billion to the Green Climate Fund alive or would Trump issue an executive order this week cancelling the American commitment?
  6. In turn, European leaders lectured Trump on the fallout for the U.S. withdrawing from the Paris Accord – a wave of international anger that would lead to retribution, declining trade with the U.S. and destroy the last shred of trust in Washington; withdrawal would be treated by the world as “diplomatic malpractice” and characterized as betrayal; Trump had delayed an announcement before he arrived at the G7 and, perhaps, might allow U.S. state interests to take precedence over fulfilling his wild and destructive promises.
  7. Europeans tried to educate Trump on globalization and trade policy, but there was little indication that they had made a dint in his thinking. However, a private meeting with Justin Trudeau seemed to indicate that Trump would not scrap NAFTA, but would work to iron out wrinkles. On the other hand, the Europeans rejected out of hand his plea for bilateral trade deals instead of multilateral ones.
  8. The Donald was sabotaged in his effort to deliver French President Emmanuel Macron his traditional macho pull and handshake. Macron, instead of greeting Trump first, let him stand there, as he planted cheek kisses on Angela Merkel, greeted several others and then, having been briefed, subverted Trump’s effort and even pressed his hand harder and longer and would not let Trump pull away.
  9. When all other leaders are seen chatting informally with one another as they look over an iron fence at the spectacular view, Trump is nowhere in sight. Instead of walking there with the others, he went in a golf cart. When he arrived, he was surrounded by a phalanx of security men and only then joined the group and appeared to dominate the conversation.
  10. When Italian Prime Minister, Matteo Renzi, as host of the conference, addressed his fellow leaders, all leaders had on headphones and listened – except Donald Trump, sitting two seats away, Donald without headphones sat looking vacantly at the table. Perhaps no one can understand Italian as well as he can.
  11. Trump had been gone too long from living in what he owned and projected his possessive individualism. Was it the requirement of collegiality that made him slip from his vacuous demeanour at the Vatican to his glumness in Taormina, Sicily?
  12. There was a media dustup over whether he referred to Germany as evil or bad, and, if “bad,” as seems to be the case, did he mean the situation in which Germany finds itself, specifically with respect to refugees, or did he mean German political policies were bad?
  13. The meetings confirmed what Angela Merkel had come to believe: a) that the U.S. was no longer a reliable ally on which Germany could depend; b) American current policies on trade and climate change were disastrous.
  14. Trump had gone from dancing with swords in Riyadh to dodging darts at the G7.

The trip overseas marked the U.S. loss of leadership in the Western world and threatened America with negative repercussions because the Europeans had linked action on climate change with trade policy. Trump managed to keep his head above water in this overseas trip as he escaped the domestic closing in on the administration in its fourth month in office, but only by moving America towards disastrous policies that would be economically and politically detrimental to the U.S.

 

With the help of Alex Zisman

A Historical Economic Overview

An Overall Sketch of the Economy: Part I A Historical Overview

by

Howard Adelman

This is my most ambitious blog series ever. I plan to do four things. First, I will offer a potted history of the global economy during the twentieth and twenty-first centuries. That alone might seem totally daunting, but, in fact, it will be a summary of an already potted history published by my eldest son, Jeremy, in an essay in Foreign Policy in this past Sunday’s issue (20 November 2016). His article is entitled, “Donald Trump Is Declaring Bankruptcy On The Post-War World Order,” and subtitled “The global system of peace and prosperity was already on life support before the U.S. president-elect decided to pull the plug.”

The article is well worth reading in its entirety and can be found online at http://foreignpolicy.com/author/jeremy-adelman/. Jeremy is a professor of history at Princeton University where he chaired the department for about a decade and now directs the Global History Lab there. He is an economic historian who holds the Charles Lee Chair as well as the Walter Samuel Carpenter III Professorship of Spanish Civilization and Culture. You might also want to read his essay in the May/June issue of Foreign Affairs entitled, “What Caused Capitalism.” If you are much more ambitious, you might also want to read his book, Worldly Philosopher: The Odyssey of Albert O. Hirschman which I reviewed over a number of blogs last year and which can be found under my name online at wordpress (https://howardadelman.com/).

The second goal I have is to offer a distillation of the current state of the global and the American-led economy, largely drawing on my reading on this issue over the past months and my attendance at two seminars on the current state of the economy. Third, drawing from those two sources, from Donald Trump’s economic pronouncements, promises and performance thus far, and from the general economic behaviour of most populists, I will try to adumbrate the effects of the latter on the current economy. Fourth, I will offer my personal plan for dealing with these expectations.
Jeremy’s essay starts off with a reference to Robert Graves (Good-Bye To All That) and the efforts after WWI to make Britain great again by restoring a bygone economic era of imperialism and British economic leadership through “throwing up trade barriers, turning currency into weapons, plunging the world into depression, and then deporting, or later exterminating, foreigners as well as their own citizens.” If it seems reminiscent of the situation we are now in, that is no accident. Donald Trump is on the verge of turning the post-WWII economic order in which the U.S. was the great stabilizer (generally) on its head; the U.S. is about to become the great destabilizer. Of course, the ground had been well prepared for Donald Trump as America’s role as the chief economic hegemon has faded.

That role began after WWII when the U.S. economy at the end of WWII was larger than the economies of Britain, and the rest of Europe, of Japan and the USSR combined. America was the postwar Leviathan, but a very liberal one that operated not primarily through coercion but through its intellectual and material influence. But Donald Trump has given voice to those nostalgic for this old role of leadership in a context where it is no longer possible. Nostalgia is perhaps the worst foundation upon which to construct an economic policy.

After WWII, America laid the foundations for the economic order that would rule the world over the following seventy years based on global cooperation versus the protectionism that led to the Great Depression combined. This international economic leadership combined with national policies that created safety nets for those negatively affected by the enormous economic dislocations of a co-operative international economic order. The latter half was intended to manage risks and shelter castaways though educational and welfare nets that caught the human byproducts of the enormous institutional, commercial and technological changes underway. The first half of that order depended on agreed upon norms, principles and rules for free trade. As Jeremy wrote, “The result was a boom. From 1950 to 1973, world per capita incomes grew by 3 percent per year — powered by a trade explosion of 8 percent per year. Cooperation triumphed; interdependence brought prosperity.” Borders were not only opened for goods and services, but for the movement of people as well.

According to Jeremy, both pillars of the new economic order gradually started to crumble and eventually collapse altogether. Trumpism is merely the wake following that collapse with all the dislocations and sorrow that such a tsunami will bring. The most significant victims are an era of tolerance and relative stability. The catalyst has been the decline in America’s leverage to allocate resources, co-ordinate the management of currencies, dismantling traded barriers and setting the standards for the post-WWII economic order. But success undermined that leadership role as competitors rose and America’s percentage of world activity fell. China today is responsible for 10% of world trade and has replaced America as the leading trade country. One of the consequences has been a trade imbalance in which the U.S. imports far more than it exports.

The 1979 recession was the first major blow to the system. But the deregulation of the banks with the consequent enormous increase in credit based on very inventive mechanisms for providing credit, offered a new lifeline. When combined with relatively cheap fossil fuels, the global economy received an enormous shot in the arm. But not in the feet. The upper torso would become too enormous for the spindly legs to support it. The most serious effects were the repercussions on this planet; the environment could not sustain the enormous growth. Further, no global system was in place to manage and offer a new foundation for badly needed leadership. The U.S. was not only no longer an economic hegemon, but was the repository of the largest number of climate change deniers in the world. What is worse, many of them occupied positions of power and the Trump election meant that they have reached the zenith of that power.

Why and How? The problem was not only the incapacity of the planet nor the system in place to manage a fossil fuel monetized economic order, but the welfare state had disintegrated alongside this development. As one protection after another fell for those negatively affected, as a whole class of citizens had their expectations and hopes crushed at the same time as the rug of security was snatched from under their feet, a large populist pool of discontent and barely simmering rage had been developed, one that could and would focus on the greatest symbol of the new immigration, the rising tide of minorities and the decline in the hegemony of white working class males.

The effort to continue to free up markets, the ability to coordinate various aspects of this economic system by the Reagan and Thatcher administrations came at great cost to the working class, which subsequently experienced 35 years of economic stagnation and, even more, a seeming indifference to this state of affairs by the political leadership of this new era of “greed is good.” The deregulators and privatizers had given a second boost to the new economic order, but it came with an enormous sacrifice by the working class. The social contract had been shredded. As Jeremy put it, “Public services and protections softened market risks before 1973; in the decades afterward they were replaced by the private comforts of combustion and monthly credit card bills.”

The carbon and credit economy got a further boost with the disintegration of its collectivist rival, the U.S.S.R., in 1989. America was once again the global hegemon. Instead of doubling down, deregulation under Clinton was accelerated. Then, under the Bush regime, America’s economic and moral leadership were sacrificed in the endless warfare in the Middle East. These events paved the way for a bankrupt casino operator coming into power. Barack Obama was merely a hapless intervener trying to hold back the tides of change and disintegration while assaulted within by a Republican-controlled Congress and challenged externally by the diminution of America’s role in the world.

The ground had been prepared for America to shift from a role as the great stabilizer to that of the great destabilizer. “The long cycle of integration and relative tolerance forged by U.S. leadership since World War II is now headed in reverse.”

With the help of Alex Zisman

The Decline of the Republican Party

The Decline of the Republican Party

by

Howard Adelman

Yesterday evening I attended a wedding. There is nothing more inspiring than seeing young people, handsome young men and beautiful young women, marry and set off to turn a cohort into a new generation. However, these days one cannot go out into the public without encountering the effects of the shock waves that have been sent through the body politic, not only in America but around the world. It is as if Italy’s massive new earthquake had encircled the globe. Whether in the hospital attending my wife and listening to the visitors talking with the patient in the next bed, or engaging in conversation last evening with two well-off businessmen – one had traveled all the way from Oregon to attend the wedding – the spectre of Donald Trump filled the air.

Preoccupation with Donald Trump pours out into the conversation unbidden. What does it mean? What does it portend for America and for the world, even if Donald Trump loses after his last spurt to close the gap? It seems that few expect Donald Trump to fade from the scene quietly even if he loses. The only consolation – I am not the only one obsessed.

Donald Trump has often been portrayed as an outlier to the Republican Party, at odds with its essential nature, principles and many, if not most, of its policies. Donald Trump from Queens has painted a self-portrait of the self-made billionaire taking on the billionaire governing class from Wall Street, the ordinary self-made man from the Bronx, Brooklyn or Queens coming forth as a cast off from the ruling hierarchy to lead his dispossessed followers like Moses towards the promised land. In fact, Donald Trump is the logical extension of the way those principles have evolved and have been expressed in most of the recent policies proposed by the GOP as the essence of what used to be its nature has been hollowed out to contribute to a darker, meaner, stressed out and grumpier America.

Begin with immigration, the initial headline issue with which Donald Trump launched his pursuit of the presidency – build a wall, deport all the illegals, Mexicans are rapists, refugees are security threats, the intake of Muslim refugees should be stopped “until we know what we are doing.” No queue jumping. No amnesties. Immigration law has to be enforced to ensure that anyone who wants to come to America waits in line until he or she is adequately vetted and selected. Fear of the invader – Mexicans and Central Americans, terrorists from the Middle East (even though the vast majority have been home-grown radicalized youth) – is married to the sense that neither the legal system nor borders have been up to the task of securing Americans (or Hungarians or Poles or Frenchmen or Brits). Ignore the reality that 25% of America’s core rite of baseball now has 25% of its players with Hispanic backgrounds. Instead, attend to the important shift in the body politic as the proportion of whites in the population is steadily reduced.

But have the Republican Party principles and policies been any different, at least in the basics? The first principle of the Republican Party platform has been that the RP “believes in immigration laws.” The fundamental criterion for any policy is not American economic self-interest but national security, though the immigration program should fundamentally be a skills-based program for selection and a temporary visa program for the unskilled. The RP advocated putting more resources into keeping people out who have not been granted legal admission to the U.S. Otherwise, they contended, the law is a farce. Amnesties only encourage a future wave of new illegals. And large numbers of illegals on American soil (estimated at 11,000,000), they insisted, place unfair demands on the American social security system. All this is stated as a given truth in spite of the data showing that illegals contribute far more to the system than they extract from it. Nevertheless, the focus is on the need to expand enforcement, the use of a Systematic Alien Verification for Entitlement (SAVE) program and the creation of a biometric data tracking system akin to the one already in place at airports.

Recall that House Leader John Boehner lost his position largely because, in his immigration reforms, he was considered too soft, including even those of his proposals that emphasized border security as the prime criterion. His plan denied any path to citizenship for anyone who had arrived on American soil illegally.

Donald Trump differed in only details – the wall should be higher and stronger. The Mexicans will pay for it. At heart, it was the same hardline Republican Party doctrine on immigration, but blasted out at many decibels higher as a boast rather than an obvious backhanded trick. Further, while the Boehner platform offered no path to citizenship for illegals, he threw them a bone – which drove his more puritanical Republicans in the House crazy, let alone The Donald himself. No legal path to citizenship, except if “they were willing to admit their culpability, pass rigorous background checks, pay significant fines and back taxes, develop proficiency in English and American civics, and be able to support themselves and their families (without access to public benefits).” On the other hand, Boehner’s plan was even more radical in some ways than ones proposed by other more radical Republican members of the House. For he would repeal the opportunity allowed for an immigrant to sponsor his wife and children.

The evidential irrationality, the huge barriers to implementation, the enormous costs undercutting any self-interest and the inhumanity of the policy proposals that would send the parents of American citizens back to their country of origin, suggests a far deeper motive that had nothing to do with the importance of upholding the rule of law. This was nativism writ large, the flip side of the undercurrent of racism and of birtherism that has haunted the Republican Party and made every day seem like Halloween.

In economic policy, the Republicans have been the clearest and most puritanical supporters of lower taxes, reduced guarantees for social security (citizens should be incentivized to provide for their own social security, social and medical benefits), minimal government, and offering the most unregulated environment for the expression of capitalism, including increased regulation for and restrictions on labour unions. Who better to choose to represent the party than a billionaire who has evidently paid no personal income taxes for eighteen years? Republicans support fewer taxes on even the rich who are esteemed as the engines of economic growth. Republicans oppose the Democratic Party proposals to institute a $15 minimum wage. Republicans certainly oppose the Affordable Care Act or Obamacare. Many in the past opposed Medicaid and Social Security. On all these economic policies, Donald agrees with the economic policies of his party.

There is one exception. The Republican Party has consistently promoted free trade agreements. The Donald has pointed to free trade as the cause of the decimation in the rust belt and characterized NAFTA as “a disaster.” “It’s the worst agreement ever signed” – though that is also how he described the Iranian nuclear deal, but, of course, for Donald Trump, there is no contradiction in declaring a large variety of arrangements as “the worst” Speaking of NAFTA, Trump promised, “We will either renegotiate it, or we will break it. Because, you know, every agreement has an end. … Every agreement has to be fair. Every agreement has a defraud clause. We’re being defrauded by all these countries.” With one stroke, Trump upended a Republican long-standing trade policy and wedded his proposal to conspiracy theorists.

More importantly, Trump had followed a long historical precedent going back to Napoleon III of appealing to those tossed aside or whose security has been reduced by the latest revolution in capitalism, what Karl Marx called the lumpen proletariat. Instead of the Hispanics, Blacks, women and gays that National Committee Chairman Reince Priebus had proposed to appeal to in his March 2013 reform recommendations for the Republican Party that recommended immigration reform and policies directed at the inclusion of minorities, Trump went in the opposite direction and appealed to white males who felt their roles had been undermined by a combination of benefits offered to minorities and opportunities transferred to foreign workers. The hollowing out of America’s industrial core, the thinning out of the middle class and the huge increase in the fat cats versus the working poor, the emergence of the new dot com economy and the financializing of corporate America, the resulting dislocation and insecurities reinforced by a weak social security system, produced an earthquake in which the optimism of the American creed came tumbling down in the face of the new Joshua and his populist trumpet blasts.

In doing so, Trump had collected a base that could offer the Republicans a majority foundation just as they had discovered fifty years earlier in the turn to take the old South away from the Democrats. Count the numbers of social conservatives concerned, for example, with abortion and embryonic stem cell research (12%), but who are disproportionately politically engaged (19%), almost offsetting an equal-sized committed liberal population (15% who would never support the Republican Party and are even more politically engaged (21%). Add to that core economic conservatives (10%), also disproportionately very engaged politically (17%). Add the two groups together and this is where you find Trump’s core support of 36% with some disaffection from economic conservatives upset by Trump’s crass populism and his rejection of free trade.

These losses, however, were more than offset by an appeal to the previously politically disaffected financially stressed members of the population who had been left behind by the economic changes underway. If this 13% of the population could be motivated to participate in politics at much higher rates than their traditional reluctance, Trump will have provided the GOP with a third strong leg and built a new and powerful foundation for its future. To retain the religious right, he opportunistically stressed conservative social values, though he was unable to sweep up large numbers of young voters sceptical of big government but liberal on social issues – Sanders supporters. Nevertheless, he had identified a potentially winning combination. For the latter group of Democratic dissenters forced Hillary initially to equivocate and subsequently support the TPP and TIP treaties only if specific modifications are made. These compromises and blandishments are unlikely to mollify the critics on her left while reinforcing the stature of Donald Trump’s unequivocal renunciation of free trade.

The Democrats, in contrast to Trump, relied on a mixture of die-hard liberals (the 21% mentioned above), minorities (12% of voting activists even though they were 14% of the population), and the new millennial left (11% of activists even though 12% of the population) giving the Democrats a 44% base of support, but one which was vulnerable if enthusiasm to vote for “crooked Hillary” were to be suppressed. This became a major goal of the Trump political campaign. Sweep the lumpen proletariat into the party and reduce the turnout for the Democrats by undermining the enthusiasm of the body politic for his opponent. If Trump has a ceiling above which he cannot rise, then lower Hillary’s floor. Get a higher percentage of the population who actually vote to support the Republican candidate. As Nathan Silver has warned, polls that fail to take this enthusiasm factor into account could well be incorrect. The “crooked Hillary” campaign targets the turnout factor for the Democrats while raising the enthusiasm of his own base which does not need any further convincing. His supporters recite the mantra like automatons while Trump runs a do-not-vote campaign targeting voters leaning towards voting for Hillary. You may hate and distrust me, but Hillary is worse.

Then there are the undecided or those who rarely vote. It becomes clear that the goal of each side is threefold: 1) peal away some supporters from the other side; 2) suppress the enthusiasm factor in the opposing camp to decrease the turnout rate of those inclined to support that side’s candidate, and 3) prevent too much slippage to minor party candidates. (For a breakdown in the factions of the American population supporting different candidates with the enthusiasm factor taken into account, but not the slippage element, see “Beyond Red vs. Blue: The Political Typology, 26 June 2014 published by the Pew Research Center for the People & the Press – http://www.people-press.org/2014/06/26/the-political-typology-beyond-red-vs-blue/)

The anti- or pro-immigration bias and the scepticism for or stress on minority rights had already been built-in on each side. “Extremism” on any of these positions might suppress enthusiasm on one side or the other, but the offset would be a boost in one’s own side’s enthusiasm factor. Clearly, we were dealing with a high-risk candidate on one side and a cautious, calculating candidate on the other side. The objective factors mattered far less than how they were perceived. Is it any wonder that substantive issues played such a small part in the debates and the election? Is it any surprise that not one question in the debates addressed the most important issue of our time – human induced climate change?

Take NAFTA. It may not have worked out nearly as well as its architects planned, creating fewer net new jobs than envisioned. But the techies and the skilled who saw their job options increase would not feel as emotional about the new economy as those distressed poorer less educated voters among the 350,000 and 750,000 directly impacted, along with the sales and service personnel that supported them. They fell by the wayside and lost jobs or moved to lower-paying ones. If the latter were combined with resentful whites and religious minorities (as long as one pandered to the social values of the latter), it can be seen that Trump had forged a potentially winning coalition, even though it would be one coming with a handicap. Thus, although the actual impact of the trade agreements and the openness to free trade had been relatively positive, though also considerably smaller than anticipated, the new targeted population became the victims of the relatively modest positive impacts of free trade. Thus, the real potential of an anti-free trade and anti-immigrant posture, whether in the U.S. or in the advanced democracies in Europe that have also experienced the rise of the alt-Right, was apparent to any opportunist.

The contradictions were not so apparent. Increase the number of high value jobs on one side and the number of low-valued jobs on the other side of a border, then not only does each side benefit from the rising tide, but the pressure on immigration is significantly reduced as increased job opportunities open up on the poorer side. Closing off the spigot through coercion rather than through foreign domestic incentives can only come about at enormous direct costs and a multitude of indirect ones so that you end up having a negative sum game for both sides.

To recognize this requires ignoring the lost political opportunity costs. And Donald Trump, with an attention span of twenty minutes, was certainly not interested in that. The same is true of the negative impacts of Donald Trump’s tax policies on the very people he is winning and getting to turn out to his large rallies. This is also true of a decrease in the social safety net for these very populations who will suffer much more than they are suffering now. But if the blame can be displaced and built into the equation from the start, that failure will only result because there is an effort by international bankers, crony capitalists, led by the get-rich-quick through government largesse of the Clinton clan and that of their corporate partners, then the possibility of political victory is enhanced by more economic suffering.

Donald Trump offered an additional new enhancing formula – an anti-imperial and anti-activist American leadership in foreign affairs, but now enhanced by the spectre of an opponent launching World War III. The irony was that Trump preached making America great again as a cover for becoming a mouth piece for the fears that the Putin mafia have been promulgating since 2014 – that of America as the initiators of a new world war. As Russia tests its new ambitions for expansion in the Ukraine and in the Middle East, make America great again became a formula for shrinking America from its global responsibilities. This switchback required extending Barack Obama’s lead in making America small again, retreating from an active interventionist role and paying far more attention to the well-being of one’s own population.

This was a tour de force for it undercut the appeal of the Hillary Democrats to their own left base. But it came at a cost, but one Donald Trump bet would work to his advantage. As Colin Powell, a former Republican Secretary of State, noted in reference to the birther movement, when nativism is combined with “a dark vein of intolerance in some parts of the party,” the party has to engage in some intense naval gazing. But conspiracy theories obviate the compulsion to do so.

Not one of Donald Trump’s competitors for the leadership of the Republican Party recognized this route to the White House. But they had already built into the party an attraction to demagoguery, an absolute insistence on no compromise, even if the cost was a burning political system crashing down upon their heads, a propensity for constructing conspiratorial groupings aimed to deprive Americans of their second amendment rights joined by a scientific conspiracy of leading intellectual figures to foster on a naïve domestic population a myth about climate change. When fostering ignorance at the expense of knowledge, when blaming others at the cost of assuming responsibility, when creating a narrative of a besieged American betrayed by the ruling establishment, the pathway to a potential victory had been forged by the previous leadership of the Republican Party. Trump had simply upped the ante, driving his rivals out of the game. The Tea Party’s fight with the traditional establishment in the party was not intended to but did serve to prepare the ground for Donald Trump by bringing into the party the power of negative thinking, the enhancement of suspicion, the huge increase in mindblindness and the anxiety and insecurity that now undergirds the party.

So when the enthusiasm factor is introduced into polling so that different voters get different weights depending on that enthusiasm, the result of outlying scientific polls show either a victory for Donald Trump or, on the other hand, a narrow victory for Hillary Clinton when she needs an overwhelming win with the consequent win in the Senate and even potentially in the House of Representatives to actually govern.

Racism, the general distrust of government, the insecurities of white males, particularly those who are less educated, as well as evangelicals primed to expect the immanent end of days, have been linked together to create a toxic brew of fear and insecurity, an emotional maelstrom that bubbles like a volcano about to explode and pour its hot lava through the cracks and fissures of the Republican Party. Hence the focus on the after-effects of the Trump earthquake and the shock waves that have reverberated around the world. Hence the sacrifice of reasoning and evidence-based policies for ones that reinforced passion and unbridled vehemence, that emphasize entertainment more than dialogue, that confers authority on celebrity itself. Hence atavistic nationalism rather than just patriotism, xenophobia married to racism and sexism. Hence a political campaign built on grievances and whining. Hence the politics of resentment. Hence the scare-mongering and the rise once again of the Know Nothings. Hence, the discontent with democracy and the faith in a rational voting population.

For those who believe in attachment, who either esteem or long for a strong community, but encounter one increasingly atomized by technology, Facebook and Twitter, the use of coarser language and a reduction in empathy are used to prove that “community” itself is weak and evanescent. The results of economic, social and technological forces have been devastating and prepared the ground for the takeover of the Republican Party, the rise of Trumpism and a divided and meaner polity with civility driven to the margins. Is it any wonder that this Halloween the main ghost is that of Donald Trump?

With the help of Alec Zisman