Thursday, June 23, 2016

The Bloom and the Rose II: The Culture of Trump's Economics

Some time ago -- before I got distracted by religious schooling and free tuition -- one of the things about which I was writing was Donald Trump. I don't mean my comments as a critique of Trump.  There are a goodly number of those already and I don't really have much to add to them. This video is actually rather good and if you are interested in a thoughtful critique, I'd recommend that you start here.

In my last post on Trump, I tried to make two points.  The first point I tried to make was that what is interesting about Donald Trump is not Donald Trump. Some people are enthused by what he says; others frustrated, upset, or worried about it. In this blog I am suggesting that we see it as political theatre that provides a window into an evolving dynamic of American culture. Trump is important for what he says, and I will get to that in this blog at some point in time. To say things are political theatre is not to minimize their importance. They are important, but I'll address that in a future blog. What I mean is that Trump is not the author of his own "success." Instead, he represents the culmination of a series of historical and cultural trends. One of those trends, I tried to argue, (and this is the second point) is a certain syncretism that marks an evolution of American Christianity. I went into that in detail in my last blog and so won't repeat it here. What it means, in short, however, is that Trump does not have to win the support of evangelical leaders in the US (as some news stories have suggested) because he already has that support. A high profile conservative evangelical or two might object to Trump but large numbers of "rank and file" do not. They are not concerned about his lifestyle, his approach to marriage, his lack of knowledge of scripture, and a mea culpa or two on his supposed support for women's right to choose will be all that is needed on that front. Why? Because Trump's ideology may indeed be inconsistent with Christianity (for instance ... loving your neighbour, caring for the poor, loving money, being slow to anger, etc.) but it is not inconsistent with the syncretic religion that calls itself Christianity in contemporary America.

(Proviso that can be skipped: I hasten to add, that I am not criticizing this religion. I support freedom of religion and I'm Canadian so the degree to which I should intervene in American public life is limited. After all, Canadians don't appreciate it when Americans tell them what to do with their government  and I don't want to flip that over and start  telling Americans what there business should be. I am, instead, analyzing American public life using Trump as a prism to try to understand where it now stands.)

What I would like to do in this blog is shift ground and look at Trump's economics. My goal here is not to review economic theory or debates in economics but, again, to conduct a cultural analysis that points to its appeal among a certain section of the US population. What is that appeal? It is,  I think, encapsulated in Trump's assertion that he can cut a deal with the US's creditors to lower the debt and hence free up money to do things with. Now, on the one hand, this is an interesting idea. It hasn't worked well for Greece but ... its not a new idea: international debt restructuring. Its merits aside, however, why does this appeal to people?  It seems to me that there are a couple of reasons.

First, it appeals because most people -- perhaps including Trump -- don't understand the US debt. Debt is often incredibly poorly understood because it is put out there either as (a) a boogeyman to be avoided at all costs or (b) not a problem. It is, in fact, neither. The US debt, in my view, is too high and the US should do something about it, provided that is done in a fair and just way. But, this is precisely the course of action that the US has not taken. As US debt has skyrocketed, in fact, the US has done the opposite of what it should so. It continued to outpace the rest of the world (almost combined, I think) in military spending. Its cut taxes, particularly on the rich, refused to regulate the very capital markets that caused the latest economic downturn, and its tried to find ways of squeezing surplus revenue out of those who can least afford to have that surplus revenue squeezed out of them: poor people, sick people, unemployed people.

Donald Trump has, of course, been a master of this and, in this regard, he represents -- which is why I am talking about him -- precisely that trend in US economic. He has substituted real things (businesses that make things) for businesses that don't (get rich quick schemes like Trump U) or "reality" TV shows that substitute an artificial voyeuristic culture peeping in on the rich and famous for real life. I'm not at all surprised that Trump made a good showing for the US Republican nomination precisely because he represents this cultural trend so well because he is part of it (although, I am surprised, but not in retrospect -- which I'll get to -- that he won). His economics, in this sense, are the economics of easy answers: of take this course and get rich or win a contest and get rich. They are the stuff of dreams and I think this is important because we need to ask whose dream and why?

None of Trump economics, however, have much to do with actual debt and actual work or even actual economics. Watching an apprentice get fired on a reality TV show is not the same as being an actual apprentice or losing one's job. Likewise, taking a get-rich-quick course (and late night TV used to be littered with these but with Trump U they went mainstream) is not the same as getting rich. In fact, get-rich-quick schemes may impede security in wealth. Why?

Ask yourself this: what do get-rich-quick schemes sell? They don't actually sell you wealth. They take your wealth and sell you a promise that if you do X, Y, and Z, you will become wealthy or at least have security. They do so, often, in a very simplistic way: everyone can do this is usually one of the tag lines (or, what the rich don't want you to know). They are often also littered with cliche-ed expressions like "dream big" "take risks" "dare to be successful.," as if the problems with income security were a lack of dreams.  This stuff, of course, works because the person taking the course or buying the scheme thinks ... I can dream; I can dare. But -- and this is the punchline -- how does the person selling the get-rich-quick scheme actually make their money?  They make their money whether you -- the person buying the scheme -- gets rich or not because they are not selling you wealth. They are selling you the scheme. And, that is what they make their money on. Does the scheme work? To the buyer, this is -- or, should be -- an important question. To the seller, it is technically irrelevant. The person selling you (or, me) the get-rich-quick scheme might want you to get rich but it is not necessary because they have made their money off you already.

Why is this important to Trump economics? It is important because it highlights one of the problems that is associated with the cultural perspectives on economics that bring us to Trump: a confusion of fantasy for reality. The idea that wealth is just out there, somewhere around the corner, if you just have the will to go after it, animates those who bought into Trump U and the economics that Trump highlights. In what passes for economics in his speeches, he talks about cutting deals and being tough and forcing others -- bending them, perhaps -- to one's will. He knows how to do it, you just have to trust him ... as thousands of Americans every year trust get-rich-quick schemes.

The second thing to note that follows from the first -- the confusion of fantasy and reality and the drastic simplification of economic issues -- is the idea that a get-rich-quick scheme can save the US. All that is needed, say with regard to national debt, is the right deal. In effect, this line of argument says "we all know what the problem is. We just need the right deal to make it happen." But, that line of argument actually confuses the problem and builds on xenophobia. For one reason or another, Americans have become preoccupied with China and their debt and Chinese business interests do own a good chunk of the American debt but ... not that much. The figure is likely somewhere around 10%. The vast, vast majority of the US debt is owned by ... Americans.  It is convenient to fault the Chinese -- an international rival against whom there are long-standing prejudices in American culture -- for the problems that beset the US economy but it would not be true. Somewhere between 2/3rds and 70% of the US debt is owned by Americans. Cutting a deal with China, in other words (or, in Trump's language forcing them to accept a deal) would only deal with about 10 cents on the dollar. The only debt holder of US debt large enough to make a real difference for the US economy is Americans. So, the truth of the matter is that a deal has to be cut with Americans, something that is conveniently not discussed in discussions of the US debt.

But, for the sake of argument, let's say that Trump is right, and there is a deal to be made with American creditors, what would happen? Imagine that Trump decided -- allowing he was US President -- to pay back only a percentage of the US debt, say 85%, which is the figure I think he mentioned. What that means is that Chinese business (or, perhaps even the state) interests would take a 15% hit on their investment, but ... so would a lot of Americans. Retirement funds, education savings, health care funds, life savings ... my guess is that we'd find a great deal of these things are actually invested in US debt. (For instance, if you or a member of your family ever bought a Canada savings bond -- they are sold through my workplace -- you own a chunk of the Canadian debt. Same in the US.) What happens then? The average middle class person who works 9 to 5 suddenly discovers that their retirement is worth 15% less; their children's educational funds are worth 15% less; they have 15% less in the rainy day investment and in the money they set aside in case they were ill. Said differently, the medicine might be worse than the disease. The only people Trump's economic policy stands to hurt is the very people who seem to be, oddly, lining up to vote for him.

What is my take-away point? Several. Trump's economics make sense because they hit a particular set of cultural values in the US. They confuse fantasy with reality, suggest that there are really simple answers "out there," blame foreigners, and potentially harm the very people supporting him. Its an odd set of cultural and political processes that is predicated, ultimately, by a serious lack of knowledge that relates to economics.

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