The Man Who Predicted Trump Now Predicts He Will Fail
The following is a transcript of a recent interview conducted by Thom Hartmann:
Thom Hartmann: On the line with us is our old friend Eamonn Fingleton, commentator with Forbes magazine, author of numerous books including In the Jaws of the Dragon. His website is fingleton.net and Eamonn is coming in from, you're in Ireland right now, right?
Eamonn Fingleton: Yes I am, Thom. Good to talk to you again.
TH: It's great talking with you. Thanks so much for being with us. So, you predicted Donald Trump would win the Republican primary back in the day, and you predicted he would win the White House. Why?
EF: Well, my first prediction was in February of this year and the basic point it seemed to me was that flyover country was being ignored in the discussion. People in Washington who control what is written about in the political debate didn't seem to take on board that the rust belt was really seething with rage about the way that the economy has been run in the last 25, 30 years.
TH: Yeah, 30 years of neoliberal so-called free trade policies have just wiped out much of America and and neither party was addressing it. Donald Trump was, and I was on the air saying, you know, on trade he's right - he's diagnosed the problem correctly. And, but by the way, Bernie Sanders was saying the same thing and it was getting the same kind of reaction, you know, look at Bernie just, you know, wiped out Michigan. He just took Michigan. And so did Trump. And I think it's for the same reason. They were both saying blow up these trade deals. So you're an expert on this stuff. You write about economics for Forbes magazine, among others, and you've written books on this and particularly on trade. What, how do, in fact, you noted in one of your articles that that we no longer in the United States even make the silicon for advanced chips. It's all made in China. So we literally can't make any kind of military weaponry without China's giving us the raw materials. How the hell do we recover from that kind of damage of, you know, 35 years of this neoliberalism?
EF: Right. That's one question and other question is, how the hell is Trump going to get the economy moving again? Because he wants to get manufacturing back but you can't get blood out of a stone. All of these key industries have migrated. The more advanced of them gone to Japan or to Korea or to Germany and then the middling level ones are in, of course, China.
TH: Yeah. Actually it was Japan makes the silicon, right?
EF: Yes
TH: My mistake. But, so, if the United States, let's take Trump out of the equation for a minute because I think he's going to, he's such a bumbler, but we'll see, I mean we'll see where this goes. But in the absence of democratic republican politics, Trump or whoever, what should we be doing in the United States to bring, first of all, should we bring manufacturing back home? I mean, you know, the position of the Third Way Democrats and the entire Republican Party for 35 years has been that manufacturing jobs are crappy jobs. Who wants those kind of jobs? We need information industry jobs, right? So should we bring manufacturing back, and if we should, how do we do it?
EF: Well, the first question is easy. Absolutely, the manufacturing sector has to be strengthened. You have to bring back the serious manufacturing industries, meaning the capital-intensive ones, the ? intensive industries. But how do you do that? It seems to me that tariffs are the solution, but they're going to be very unpopular if he really goes at it in a serious way. He would have to apply essentially a tariff to the entire world because if he doesn't, if he applies tariffs simply to China then the manufacturing for the American market will move to Vietnam, it will move to Brazil, it will move to Mexico, Canada, wherever. So, if he wants, seriously wants to get manufacturing back he has to use tariffs right across the board.
TH: But we had tariffs against the entire world for 200 years. It worked, didn't it?
EF: Absolutely, it did. You're well-informed on the history of the United States. That story has been very much suppressed in the last 50 years. But yes, America was for its most successful decades very protectionist.
TH: Yeah, the George Washington administration at the behest of Alexander Hamilton, 1791 he presented is his 11 point plan on trade, his Report on Manufactures, most of it was adopted by 1793. The entire federal government from the George Washington administration to the Abraham Lincoln administration was funded by tariffs a hundred percent. From the Lincoln administration to World War One two thirds of the government was funded by tariffs. World War One to World War Two, one third of the government was funded by tariffs. And now, our tariffs are pretty much non-existent. It seems to me like we should be able to just look back and say gee, what worked? But then you get these guys, the smartest guys in the room, like Paul Krugman and Tom Friedman who say, 'oh, but that was then and this is now. It's a new world. We've got technology, we've got computers, we've got robots. Things are changing. It's not just you're losing manufacturing jobs because you don't because you lost factories, you're losing manufacturing jobs because of robots and therefore you're fighting a battle from the 19th century.' What do you say to that?
EF: Well, I would direct people's attention to the trade balance - the current account as you know is the widest measure of trade. Last year the United States ran a deficit of 463 billion dollars on current account. That deficit had to be financed. It was financed mainly by China, Japan, Korea, Germany, Saudi Arabia. These countries have been buying US Treasury bonds and they've been doing it as, frankly, a power play, because in return for America borrowing from these countries, Washington has to turn a blind eye to for instance the protectionism in East Asia. There's a deal there. It's not explicitly stated but it's obvious that that's going on.
So, how does America eliminate its trade deficits? Well, one way of answering the question is to direct your attention to countries that don't have trade deficits, they have trade surpluses. So all this talk about the technology has changed so that everything is much more productive now in manufacturing and we need fewer live human beings to produce the goods, that is not how things appear in, for instance, Japan, in Germany to name two countries that have very high wages, wages comparable to American levels
TH: And they have essentially protectionist trade policies, do they not? Only they don't do it with tariffs, they do it with VAT taxes and domestic content requirements and regulations and that kind of thing?
EF: Absolutely, yes. If you look at these countries' roads and look at the brand names on the roads, they are local companies that make the cars on the roads.
Thom Hartmann: Yeah, you go to Germany, all you see are German cars.
EF: Yes, right, and even more so in Japan. I mean, Volkswagen is a match for Toyota everywhere else in the world but not in Japan. It has about one percent of the market in Japan. Worldwide, it has about twenty-five, thirty percent.
TH: Right, and South Korea started out with protectionism. I believe you wrote about that at some length, you and and Dr. Chang, I think it was, out of Oxford, "Pulling Up The Ladder", I think is his book. ["Kicking Away the Ladder" by Ha-Joon Chang - ed.]. But, so, if we brought back tariffs, every country that we have a trade agreement with would say that we are in violation of the trade agreement, it would go to investor state dispute settlement, we would be found guilty, we would be fined, we would get nailed, so the president should simply get us out of those agreements?
EF: I think that it's in character for Trump really to sort of bulldoze his way through and frankly that's what he's going to need in this instance. I think that if he goes the legal route as it were and tries to comply with all sorts of international agreements, he's going get nowhere. So he has to take the law into his own hands, frankly.
TH: Which is basically what Bernie Sanders was suggesting doing, too. Here's the problem from my point of view: if Trump does that and is successful and bring those jobs back, the Republican Party is going to get credit for something that they have fought against through their entire history. I mean, every single one of these trade deals was authored by Republicans and passed through the both the House and the Senate by a majority of Republican votes. Trump figured out that that was a lousy position and he fought the entire Republican Party on this. Every single one of his primary opponents said he was crazy about trade. And if he does this and if he's successful, we're going to have more Republicans, more Republican policies and that gives me the creepy-crawlies. Now, I realize you're not a political commentator, but how do I deal with this?
EF: Well, I think that there's a big if there. I have a feeling that for all Trump's nationalistic fervor he's not going to succeed. That's very unfortunately my analysis, that he has the right ideas for trade and manufacturing but the problem, the rot has just gone too far.
TH: And his own party is by and large opposed to all this stuff. I mean, you've got all these Republican members of Congress who are bought and paid for by industries that are manufacturing overseas
EF: Yeah, absolutely. That was the point I was going to make and also the lobbyists are just moving in and there's evidence that some of them are going to be inside his administration.
TH: Right. Yeah and you've got Reince Priebus as his Chief of Staff. You know the old saying, 'personnel is policy'. It looks like policy is going to be Republican policy with populist rhetoric and I think that's a prescription, that's dynamite. That's a prescription for disaster, for an explosion.
EF: I checked on Priebus today with a very well-placed source in Washington and yes, the news I have is that he's a trade ideologue, free-trade ideologue.
TH: Right, and, you know, he's out of Wisconsin, he's been in politics forever, he's a conventional Republican, he's held their conventional Republicans together. He sort of, you know, he's a good buddy with Paul Ryan. So it's going to be real interesting when the people in Indiana who Trump promised he was going to stop their Carrier factory from going to China, when he doesn't stop it, what do you think?
EF: Well, yeah, and it's, basically Trump doesn't have the Republican Party behind him and he has achieved miracles in getting himself elected. Maybe he'll achieve another miracle in turning the Republican Party around on these issues but it's hard to see how he's going to do it.
TH: Yeah, yeah. It's an amazing time that we live in and there's some some real serious challenges here. Eamonn Fingleton, commentator at Forbes magazine where way back in February he predicted Trump is coming, author of numerous books including In the Jaws of the Dragon, fingleton.net is his website.
In Italy, A Bold New Populist Plan Led By a Comedian Fires Up a Country
Comedian Beppe Grillo was surprised himself when his Five Star Movement got 8.7 million votes in the Italian general election of February 24-25th. His movement is now the biggest single party in the chamber of deputies, says The Guardian, which makes him “a kingmaker in a hung parliament.”
Grillo’s is the party of “no.” In a candidacy based on satire, he organized an annual "V‑Day Celebration," the "V" standing for vaffanculo (“f—k off"). He rejects the status quo—all the existing parties and their monopoly control of politics, jobs, and financing—and seeks a referendum on all international treaties, including NATO membership, free trade agreements and the Euro.
"If we get into parliament,” says Grillo, “we would bring the old system down, not because we would enjoy doing so but because the system is rotten." Critics fear, and supporters hope, that if his party succeeds, it could break the Euro system.
But being against everything, says Mike Whitney in Counterpunch, is not a platform:
"To govern, one needs ideas and a strategy for implementing those ideas. Grillo’s team has neither. They are defined more in terms of the things they are against than things they are for. It’s fine to want to “throw the bums out”, but that won’t put people back to work or boost growth or end the slump. Without a coherent plan to govern, M5S could end up in the political trash heap, along with their right-wing predecessors, the Tea Party."
Steve Colatrella, who lives in Italy and also has an article in Counterpunch on the Grillo phenomenon, has a different take on the surprise win. He says Grillo does have a platform of positive proposals. Besides rejecting all the existing parties and treaties, Grillo’s program includes the following:
It is a platform that could actually work. Austerity has been tested for a decade in the Eurozone and has failed, while the proposals in Grillo’s plan have been tested in other countries and have succeeded.
Default: Lessons from Iceland and South America
Default on the public debt has been pulled off quite successfully in Iceland, Argentina, Ecuador, and Russia, among other countries. Whitney cites a clip from Grillo’s blog suggesting that this is also the way out for Italy:
The public debt has not been growing in recent years because of too much expenditure . . . Between 1980 and 2011, spending was lower than the tax revenue by 484 billion (thus we have been really virtuous) but the interest payments (on the debt of 2,141 billion) that we had to pay in that period have made us poor. In the last 20 years, GDP has been growing slowly, while the debt has exploded.
. . . [S]peculators . . . are contributing to price falls so as to bring about higher interest rates. It’s the usurer’s technique. Thus the debt becomes an opportunity to maximize earnings in the market at the expense of the nation. . . . If financial powerbrokers use speculation to increase their earnings and force governments to pay the highest possible interest rates, the result is recession for the State that’s in debt as well as their loss of sovereignty.
. . . There are alternatives. These are being put into effect by some countries in South America and by Iceland. . . . The risk is that we are going to reach default in any case with the devaluation of the debt, and the Nation impoverished and on its knees. [Beppe Grillo blog]
Bank Nationalization: China Shows What Can Be Done
Grillo’s second proposal, nationalizing the banks, has also been tested and proven elsewhere, most notably in China. In an April 2012 article in The American Conservative titled “China’s Rise, America’s Fall,” Ron Unz observes:
During the three decades to 2010, China achieved perhaps the most rapid sustained rate of economic development in the history of the human species, with its real economy growing almost 40-fold between 1978 and 2010. In 1978, America’s economy was 15 times larger, but according to most international estimates, China is now set to surpass America’s total economic output within just another few years.
According to Eamonn Fingleton in In The Jaws of the Dragon (2009), the fountain that feeds this tide is a strong public banking sector:
Capitalism's triumph in China has been proclaimed in countless books in recent years. . . . But . . . the higher reaches of its economy remain comprehensively controlled in a way that is the antithesis of everything we associate with Western capitalism. The key to this control is the Chinese banking system . . . [which is] not only state-owned but, as in other East Asian miracle economies, functions overtly as a major tool of the central government’s industrial policy.
Guaranteed Basic Income—Not Just Welfare
Grillo’s third proposal, a guaranteed basic income, is not just an off-the-wall, utopian idea either. A national dividend has been urged by the “Social Credit” school of monetary reform for nearly a century, and the U.S. Basic Income Guarantee Network has held a dozen annual conferences. They feel that a guaranteed basic income is the key to keeping modern, highly productive economies humming.
In Europe, the proposal is being pursued not just by Grillo’s southern European party but by the sober Swiss of the north. An initiative to establish a new federal law for an unconditional basic income was formally introduced in Switzerland in April 2012. The idea consists of giving to all citizens a monthly income that is neither means-tested nor work-related. Under the Swiss referendum system of direct democracy, if the initiative gathers more than 100,000 signatures before October 2013, the Federal Assembly is required to look into it.
Colatrella does not say where Grillo plans to get the money for Italy’s guaranteed basic income, but in Social Credit theory, it would simply be issued outright by the government; and Grillo, who has an accounting background, evidently agrees with that approach to funding. He said in a presentation available on YouTube:
The Bank of Italy a private join-stock company, ownership comprises 10 insurance companies, 10 foundations, and 10 banks, that are all joint-stock companies . . . They issue the money out of thin air and lend it to us. It’s the State who is supposed to issue it. We need money to work. The State should say: “There’s scarcity of money? I’ll issue some and put it into circulation. Money is plentiful? I’ll withdraw and burn some of it.” . . . Money is needed to keep prices stable and to let us work.
The Key to a Thriving Economy
Major C.H. Douglas, the thought leader of the Social Credit movement, argued that the economy routinely produces more goods and services than consumers have the money to purchase, because workers collectively do not get paid enough to cover the cost of the things they make. This is true because of external costs such as interest paid to banks, and because some portion of the national income is stashed in savings accounts, investment accounts, and under mattresses rather than spent on the GDP.
To fill what Social Crediters call “the gap,” so that “demand” rises to meet “supply,” additional money needs to be gotten into the circulating money supply. Douglas recommended doing it with a national dividend for everyone, an entitlement by “grace” rather than “works,” something that was necessary just to raise purchasing power enough to cover the products on the market.
In the 1930s and 1940s, critics of Social Credit called it “funny money” and said it would merely inflate the money supply. The critics prevailed, and the Social Credit solution has not had much chance to be tested. But the possibilities were demonstrated in New Zealand during the Great Depression, when a state housing project was funded with credit issued by the Reserve Bank of New Zealand, the nationalized central bank. According to New Zealand commentator Kerry Bolton, this one measure was sufficient to resolve 75% of unemployment in the midst of the Great Depression.
Bolton notes that this was achieved without causing inflation. When new money is used to create new goods and services, supply rises along with demand and prices remain stable; but the “demand” has to come first. No business owner will invest in more capacity or production without first seeing a demand. No demand, no new jobs and no economic expansion.
The Need to Restore Economic Sovereignty
The money for a guaranteed basic income could be created by a nationalized central bank in the same way that the Reserve Bank of New Zealand did it, and that central bank “quantitative easing” (QE) is created out of nothing on a computer screen today. The problem with today’s QE is that it has not gotten money into the pockets of consumers. The money has gotten—and can get—no further than the reserve accounts of banks, as explained here and here. A dividend paid directly to consumers would be “quantitative easing” for the people.
A basic income guarantee paid for with central bank credit would not be “welfare” but would eliminate the need for welfare. It would be social security for all, replacing social security payments, unemployment insurance, and welfare taxes. It could also replace much of the consumer debt that is choking the private economy, growing exponentially at usurious compound interest rates.
As Grillo points out, it is not the cost of government but the cost of money itself that has bankrupted Italy. If the country wishes to free itself from the shackles of debt and restore the prosperity it once had, it will need to take back its monetary sovereignty and issue its own money, either directly or through its own nationalized central bank. If Grillo's party comes to power and follows through with his platform, those shackles on the Italian economy might actually be released.