Trump's Economic Nationalism Starts To Crater US Economy

The latest US economic data shows that Trump's tariffs, trade wars, and other policies of economic nationalism, have now begun to crater the US economy, after just a few months of him beginning to implement them. As with the history of Trump in business, it is a process of inevitable failure, incompetence, and bankruptcy, though Trump always ensures that he and his family have never been the ones to suffer financially from it. The pain, and enduring financial loss always falls on the companies that Trump controls via his shareholdings, the employees and other creditors of those companies, and the ordinary workers living in the areas around which those companies are based. It once again demonstrates the corrupt nature of late capitalism, and why its time that the corrupt practice of shareholders having control of companies they do not own should end.

Of course, Trump is not the only money-lending capitalist to do that. Ever since the Limited Liabilities Act was passed, in Britain, in 1855, and similar company laws exist, now, across the globe, shareholders get to control companies they do not own, but who they merely lend money to, in return for shares, but do not have the same responsibilities for the companies' debt that a private owner does. If Joe Bloggs opens a corner shop, and the shop goes bust, Joe Bloggs is, also, liable for all of the debts of the shop out of their own pocket. Not so a shareholder in a limited company. All they can lose is the money they loaned to the company in return for shares. However, those shareholders, because they get to control the company, usually ensure that, as quickly as possible, they already get paid back to them that money, in the form of dividends, and other capital transfers, so that, if the company does go belly up, they will not have lost out, unlike its workers, who are the real owners of the company, but who get no control over it.

Nor is Trump the only one to carry out the trick of getting workers to buy what they already owned in the first place. When Thatcher sold off state assets in the 1980's, as Arthur Daley, remarked in an episode of Minder, during the time, she pulled off the trick of getting millions of workers to cough up money to buy shares in those companies, as they were privatised. In other words to buy up what they all already collectively owned! She did the same thing with pensions, and, now, Rachel Reeves wants to pull off a similar trick to boost stock market valuations.

The experience of Thatcher's Britain, and Reagan's America, showed that, ultimately, that debt fuelled con-trick, essentially a Ponzi Scheme, only acted to asset strip the real capital of those economies whilst creating huge disparities of apparent wealth, based on the blowing up of asset price bubbles that inevitably burst, as with 2008, and to which they have no answer other than to try to inflate them again, to protect the interests of the ruling-class owners of those assets. We see a new global asset price bubble again, whether you look at property prices, land prices, stock and bond prices or cryptocurrency, and every other target of speculation. A new global debt crisis is under way, which is why governments and central banks are trying to hold back rises in interest rates, but are failing.

Trump is a product of that conservative-social-democratic attempt to defy the laws of economic gravity, in the 1980's and 90's, by creating huge amounts of debt and credit, of inflating the currency supply so as to be able to buy up financial assets, and which has now collapsed. Trump himself, of course, does not have the brains to have taken advantage of that situation, but as with the ghost-writing of “The Art of The Deal” - which he reportedly has not even read, let alone written – did have sufficient money to employ people who did have the brains to do it for him. As with Trump's Presidency, and his implementation of his reactionary, petty-bourgeois nationalist agenda, the path to that point has been laid well in advance, for more than 20 years, by the policies of conservative social-democracy, and its inevitable failure.

The outcome of that reactionary, petty-bourgeois nationalist agenda was already prefigured in the consequences of Brexit. Trump, of course, was a huge proponent of Brexit. Even before it was nominally implemented, the vote in favour of Brexit, caused a crash in the value of the Pound, itself contributing to the foundations of the inflation that developed in the UK in the following years. It also meant that businesses began to look to move out of Britain to other EU countries, understanding that it would, inevitably, however hard or soft the eventual Brexit was, cause an increase in the costs of business in Britain, reducing profits, and reducing trade with the EU. That, is what has happened, despite the fact that Britain was forced to accept the reality that, if it was not to suffer an economic collapse, it could only ever have a Brexit In Name Only, in which it is formally outside the EU, and so has no voice inside it, and yet still has to abide by EU rules and regulations, in order to continue trading with what is by far its biggest trade partner.

Brexit has reduced British GDP, already, by 4%, and is costing it £40 billion each and every year, in lost taxes, as a result of that fall in economic activity. If Reeves really wanted to plug one of her holes, the answer is simple - apply to re-join the EU, now. But, Starmer's Blue Labour cannot do that, because they have dug the hole so big that they cannot reverse course, and admit their error. Like Macbeth, they are so steeped in blood, in so many ways. Instead, they prefer to compound it further, by sucking up to the likes of Trump, and frantically seeking to win over his supporters in Britain, away from Trump's British affiliate, The Farage Company.

So, the same path towards economic chaos and catastrophe could easily be foretold when Trump began to implement those same economic nationalist policies in the US. Given the huge size of the US economy, compared to that of the, now, rather puny British economy, in global terms, it was obviously going to take time for that to manifest itself, as I wrote earlier this year. Like a super tanker, it would take time for its own inertia to be overcome by the idiocy of Trump's tariffs and other damaging policies. But, it has come sooner than might have been expected. When, the US non-farms payrolls data came in, a couple of months ago, showing that the US economy was no longer creating the number of jobs it had been doing during the Biden Presidency, Trump fired the head of the BLS. But, having done so, Trump finds that the latest data shows that the economy is slowing even faster, and creating even fewer jobs!

During Biden's Presidency, which was hardly, itself, a model of economic competency, average monthly payrolls growth was around 300,000. In July, the figure that provoked Trump's ire was just 79,000, and for August, it has fallen further still, to just 22,000. As with his record in business, Trump's economic policies are already failing, and beginning to crater the US economy, which is not an easy thing to do given the huge size and advantages that the US has in terms of the global economy. He brags about the billions of dollars the US state is taking in in tariffs, but that is billions of dollars being taken out of the US economy! The tariffs are a US consumption tax, just like VAT, in Europe, and, in the first instance, are paid by US importers. Those importers either eat that tax out of their profits, or else pass it on in higher US prices, paid by US consumers.

But, in current conditions, those US consumers, then, cover their increased costs of living via higher wages, and those higher wages, then, hit the profits of US companies in general, undermining their capacity to retain profits for expansion. To counter that, they raise prices further, facilitated by the role of commercial credit, which leads to an expansion of liquidity, and inflation, as the currency is devalued further. Workers, then, need to compensate for that second round of price rises by higher nominal wages, once more, so that the idea that the impact of tariffs was only going to be a one-off increase in costs and prices was never tenable, even setting aside the factor of tariffs themselves having a longer term impact on causing input prices to rise, throughout the global supply chain.

And tariffs are not the only aspect of Trump's economic nationalist agenda, which is starting to crater the US economy. The role of ICE goons roaming the country, like the 1930's brown shirts in Germany looking for Jews, gypsies and homosexuals, of itself, is destabilising a large part of the US economy. The US as it heads towards the abyss is being shunned by huge numbers of people whether in relation to trade, direct investment, or just tourism. Trump claims to want to have foreign multinational companies set up in the US, but the raid on the Hyundai plant in the US, last week, in which hundreds of South Korean workers and managers at the plant were rounded up by Trump's goons is hardly likely to encourage such investment, rather its likely to undermine the investment that already exists. For a start, as more than 300 of those Korean workers have now been deported from the US plant, its own operation is undermined, itself impacting the US economy. Rather than increasing investment in the US, its more likely that companies such as Hyundai will close down the plants they already have, and move to other more stable economies, as Trump turns the US, which is already looking like a rogue state, alongside Israel, into a huge banana Republic. That is the future that the reactionary nationalists not just of the Farage Company, but also of Starmer's Blue Labour are tying themselves to.