Leo Panitch and Paul Jay discuss what the consequences of Trump’s plans to deregulate Wall St., reduce taxes, create an infrastructure boondoggle, attack unions and foreign policy adventures will have on the global economy

Story Transcript

PAUL JAY: Welcome to The Real News Network. I’m Paul Jay. Well, American exceptionalism, something Donald Trump and most of the American elite believes in, and certainly much of the American population believes in, sees the United States as the indispensable nation. That’s usually referred to in its military capacity, the gendarmes of the globe and so on, and there is truth of that in terms of the maintenance of global capitalism and the role the United States plays in that. But also indispensable is the United States’ role in managing global finance, and we saw that in the ’07-’08 crisis, the, of course, owning the reserve currency of the global and the role of the Fed, the United States plays a very unique role in making sure global capitalism prospers and survives. And that includes reining in some of the most egregious excesses of global capitalism, which is why many sections of the elites, and even the financial elites, saw the necessity for legislation like Dodd-Frank that would rein in some of those excesses. Well, Donald Trump wants to undo all of that, or Donald Trump and the people behind Donald Trump want to undo all of that. They want to gut or get rid of Dodd-Frank, and then some. They mostly want to deregulate Wall Street. One of the more important people behind Donald Trump is Robert Mercer, and Mercer is one of the more successful high-frequency quantitative traders on the globe. He’s the Co-CEO of Renaissance Technology, together with James Simons created a firm that makes returns of anywhere from 51% to 80% annually, far surpassing any other hedge fund on the planet. Well, Robert Mercer owns Breitbart News, or is at least the principle investor. He hired Bannon — who runs Breitbart News, or did — works for Mercer. Of course, Bannon is now the Chief Strategist for Donald Trump. Kellyanne Conway worked for Mercer. She ran the super PAC for Ted Cruz, who Mercer originally was going to anoint and try to make President, and then switched to Trump. So, behind Donald Trump, you have someone who represents a sector of Wall Street that’s perhaps its most parasitical. These are guys that take massive amounts of money and play the market, sometimes in nanoseconds, making buys and sells on the slightest variations; of course, large volatility makes them even more money. They don’t really do anything productive, but they do reap enormous profits. So, what is all this going to mean for the American role in managing global capitalism? Now joining us to talk about this from Toronto is Leo Panitch. Leo is Professor Emeritus and Senior Scholar at York University. He’s also the co-author of the book The Making of Global Capitalism: The Political Economy of American Empire. Thanks very much for joining us, Leo. LEO PANITCH: Glad to be here, Paul. PAUL JAY: So, what do you make of Trump and the people around him? The idea of managing global capitalism in the interests of sort of a broader systemic interest does not seem very high, or at least not as high, on their agenda as making short-term, quick profits. LEO PANITCH: Well, part of managing global capitalism, and maybe the main part of it in the era of deregulation and neo-liberalism, have been firefighting — have precisely been that when financial crises explode in this type of a globalized financial system, on which much of production does depend, I would say, because it depends so much on speculative trading and derivative markets, especially on exchange rates. But, in any case, then the United States, the Treasury and the Federal Reserve, have played the role of global firefighter. They not only have tried to prevent a cascading series of financial crises that would bring down the world’s banking system, the world’s trading system, etcetera, they have coordinated with the Central Banks and the finance ministries of the rest of the world, initially the G7 and, since the 2007-2008 crisis, the G20. So, it’s mostly that. Now, they also have coordinated back since the 1970s — they’ve had to pull the Germans kicking and screaming into this, but to some extent they have — they coordinated establishing a minimum level of capital adequacy for the big banks. And they all are dependent on one another. When there’s a run on one of these guys — and of course, your online traders are doing this on their own dime, they’re borrowing money constantly, turning it over — so they’re linked into the banking system. Now, the big question is, will the Treasury be interested in, be capable of, acting as a global firefighter? When Jim [sic] O’Neill came in as Treasury Secretary under Bush in 2000, he was very haughty about the kind of role that Rubin and Summers had played at the Treasury in firefighting financial crises. And that goes back to the Mexican peso crisis, when interest rates were raised in 1994, and then especially the Asian crisis in ’97-’98. And, initially, you know, were the reasons Argentina defaulted on its debt was that O’Neill didn’t do much about that financial crisis, given when the Argentine economy collapsed. They learned their lesson quickly. And someone like Hank Paulson, you know, who had come from Goldman Sachs to the Bush Treasury to succeed O’Neill, was also all about deregulation. He wanted a light touch regulatory system like that of the City of London. But, boy, when the 2000, 2007-2008 crisis emerged, he was dragged into this — they let Lehman Brothers go, and then it all blew up in their faces. So, you know, we will have to see. I think what we can be sure of is that there will be financial crises all the more, and will they have the capacity — you know, will the deep state in the financial sector, which isn’t about just appointing the Treasury Secretary, the Deputy Secretaries, etcetera, but the bureaucrats deeper down in the Treasury Department, the Federal Reserve at each level — will they be capable of playing this role? They have an interest in playing this role. You know, we tend to forget that with just months after Greenspan became Head of the Federal Reserve, the online trading system that you were referring to in stocks back in 1987 led the stock market to collapse. And Greenspan, the great Ayn Rand, “let’s have small government,” etcetera, etcetera, immediately told the principals of all the big New York banks, “Don’t worry, we’ll give you as much liquidity as you need,” and he did. And that’s what they’ve always done. So, what these guys will do, they’ll cut taxes, they’ll run up deficits. You’re right — they’ll deregulate. They may keep some eye on capital adequacy on the banks, that’s one of the things that the Obama Administration has accomplished. There will be financial crises. I think that these cynical bastards will act as firefighters in that instance. And, you know, having screamed and yelled against the Democrats for doing this, they will bail out the banking system. PAUL JAY: Now, I think it’s important to add that when they fought the fires by introducing liquidity into the banking system, and a certain amount of regulation, they did it in a way that made sure that there were still super-profits at the level of the banks and certainly people that run the banks, and we know that most of the post-’07-’08 income that was resuscitated went to 1% of the population. But on the other hand, they did stop the system from unraveling. I guess part of the question is, yes, they might put out some of the worst fires, but are we also entering a period of, instead of crony capitalism, which is more or less what we’ve been in, into criminal capitalism? A lot of the people around Trump are in the realm of criminality. LEO PANITCH:

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Can Trump’s Gangster Capitalism Manage the Global Economy?

by Leo Panitch, The Real News Network
November 28, 2016

<h1>Can Trump’s Gangster Capitalism Manage the Global Economy?</h1> <p class="byline">by Leo Panitch, The Real News Network <br />November 28, 2016</p> <p>https://www.youtube.com/watch?v=w8MFW6SO5hQ</p> <p>Leo Panitch and Paul Jay discuss what the consequences of Trump’s plans to deregulate Wall St., reduce taxes, create an infrastructure boondoggle, attack unions and foreign policy adventures will have on the global economy</p> <hr class="wp-block-separator" /> <h2>Story Transcript</h2> <p>PAUL JAY: Welcome to The Real News Network. I’m Paul Jay. Well, American exceptionalism, something Donald Trump and most of the American elite believes in, and certainly much of the American population believes in, sees the United States as the indispensable nation. That’s usually referred to in its military capacity, the gendarmes of the globe and so on, and there is truth of that in terms of the maintenance of global capitalism and the role the United States plays in that. But also indispensable is the United States’ role in managing global finance, and we saw that in the ’07-’08 crisis, the, of course, owning the reserve currency of the global and the role of the Fed, the United States plays a very unique role in making sure global capitalism prospers and survives. And that includes reining in some of the most egregious excesses of global capitalism, which is why many sections of the elites, and even the financial elites, saw the necessity for legislation like Dodd-Frank that would rein in some of those excesses. </p> <p>Well, Donald Trump wants to undo all of that, or Donald Trump and the people behind Donald Trump want to undo all of that. They want to gut or get rid of Dodd-Frank, and then some. They mostly want to deregulate Wall Street. One of the more important people behind Donald Trump is Robert Mercer, and Mercer is one of the more successful high-frequency quantitative traders on the globe. He’s the Co-CEO of Renaissance Technology, together with James Simons created a firm that makes returns of anywhere from 51% to 80% annually, far surpassing any other hedge fund on the planet. Well, Robert Mercer owns Breitbart News, or is at least the principle investor. He hired Bannon — who runs Breitbart News, or did — works for Mercer. Of course, Bannon is now the Chief Strategist for Donald Trump. Kellyanne Conway worked for Mercer. She ran the super PAC for Ted Cruz, who Mercer originally was going to anoint and try to make President, and then switched to Trump.</p> <p>So, behind Donald Trump, you have someone who represents a sector of Wall Street that’s perhaps its most parasitical. These are guys that take massive amounts of money and play the market, sometimes in nanoseconds, making buys and sells on the slightest variations; of course, large volatility makes them even more money. They don’t really do anything productive, but they do reap enormous profits. So, what is all this going to mean for the American role in managing global capitalism? Now joining us to talk about this from Toronto is Leo Panitch. Leo is Professor Emeritus and Senior Scholar at York University. He’s also the co-author of the book The Making of Global Capitalism: The Political Economy of American Empire. Thanks very much for joining us, Leo. </p> <p>LEO PANITCH: Glad to be here, Paul. </p> <p>PAUL JAY: So, what do you make of Trump and the people around him? The idea of managing global capitalism in the interests of sort of a broader systemic interest does not seem very high, or at least not as high, on their agenda as making short-term, quick profits. </p> <p>LEO PANITCH: Well, part of managing global capitalism, and maybe the main part of it in the era of deregulation and neo-liberalism, have been firefighting — have precisely been that when financial crises explode in this type of a globalized financial system, on which much of production does depend, I would say, because it depends so much on speculative trading and derivative markets, especially on exchange rates. But, in any case, then the United States, the Treasury and the Federal Reserve, have played the role of global firefighter. They not only have tried to prevent a cascading series of financial crises that would bring down the world’s banking system, the world’s trading system, etcetera, they have coordinated with the Central Banks and the finance ministries of the rest of the world, initially the G7 and, since the 2007-2008 crisis, the G20. So, it’s mostly that.</p> <p>Now, they also have coordinated back since the 1970s — they’ve had to pull the Germans kicking and screaming into this, but to some extent they have — they coordinated establishing a minimum level of capital adequacy for the big banks. And they all are dependent on one another. When there’s a run on one of these guys — and of course, your online traders are doing this on their own dime, they’re borrowing money constantly, turning it over — so they’re linked into the banking system. Now, the big question is, will the Treasury be interested in, be capable of, acting as a global firefighter? When Jim [sic] O’Neill came in as Treasury Secretary under Bush in 2000, he was very haughty about the kind of role that Rubin and Summers had played at the Treasury in firefighting financial crises. And that goes back to the Mexican peso crisis, when interest rates were raised in 1994, and then especially the Asian crisis in ’97-’98. And, initially, you know, were the reasons Argentina defaulted on its debt was that O’Neill didn’t do much about that financial crisis, given when the Argentine economy collapsed. They learned their lesson quickly. And someone like Hank Paulson, you know, who had come from Goldman Sachs to the Bush Treasury to succeed O’Neill, was also all about deregulation. He wanted a light touch regulatory system like that of the City of London. But, boy, when the 2000, 2007-2008 crisis emerged, he was dragged into this — they let Lehman Brothers go, and then it all blew up in their faces.</p> <p>So, you know, we will have to see. I think what we can be sure of is that there will be financial crises all the more, and will they have the capacity — you know, will the deep state in the financial sector, which isn’t about just appointing the Treasury Secretary, the Deputy Secretaries, etcetera, but the bureaucrats deeper down in the Treasury Department, the Federal Reserve at each level — will they be capable of playing this role? They have an interest in playing this role. You know, we tend to forget that with just months after Greenspan became Head of the Federal Reserve, the online trading system that you were referring to in stocks back in 1987 led the stock market to collapse. And Greenspan, the great Ayn Rand, “let’s have small government,” etcetera, etcetera, immediately told the principals of all the big New York banks, “Don’t worry, we’ll give you as much liquidity as you need,” and he did. And that’s what they’ve always done. So, what these guys will do, they’ll cut taxes, they’ll run up deficits.</p> <p>You’re right — they’ll deregulate. They may keep some eye on capital adequacy on the banks, that’s one of the things that the Obama Administration has accomplished. There will be financial crises. I think that these cynical bastards will act as firefighters in that instance. And, you know, having screamed and yelled against the Democrats for doing this, they will bail out the banking system. </p> <p>PAUL JAY: Now, I think it’s important to add that when they fought the fires by introducing liquidity into the banking system, and a certain amount of regulation, they did it in a way that made sure that there were still super-profits at the level of the banks and certainly people that run the banks, and we know that most of the post-’07-’08 income that was resuscitated went to 1% of the population. But on the other hand, they did stop the system from unraveling. I guess part of the question is, yes, they might put out some of the worst fires, but are we also entering a period of, instead of crony capitalism, which is more or less what we’ve been in, into criminal capitalism? A lot of the people around Trump are in the realm of criminality. </p> <p>LEO PANITCH: </p> <p> There’s always been a fine line between crony capitalism and criminal capitalism. Yeah, I… or, even gangster capitalism of the kind that we see in Russia, and Trump has not always been a million miles away from that, going back to his casinos in the Black Sea(?). Yeah, I think we’re going to see scandal after scandal. I think we’re going to see a lot of financial crises, and we’ll have to see whether the system can be held together in the wake of this. One of the great fears about throwing money into the system is that it’ll also spur inflation. That was always the great fear, and it’s one of the reasons that they always bumped up interest rates after doing this.</p> <p>What I fear is that in order to ensure it doesn’t spur inflation that we will see a lot of repression of trade unionism. Not only public sector trade unionism, although that will definitely happen, not just in the sense of general legislation that will mean that there isn’t a union dues checkoff(?) for public sector workers, but much more ominously by the use of coercive measures, as happened with Reagan and the air traffic controllers, which Paul Volcker told me explicitly was much more important in setting the tone for neo-liberalism than was his attempt to break the unions through very high interest rates which caused unemployment. He thought it was done for crony and coercive action against a union that had voted for Reagan, and had urged their members to vote for Reagan. </p> <p>PAUL JAY: Yeah, in fact, more than they didn’t just vote for him, they actually got a letter from Reagan before the election… </p> <p>LEO PANITCH: Yeah. </p> <p>PAUL JAY: …promising them that he would never crack down on their right to strike, and then after they voted for him, that’s exactly what he did. </p> <p>LEO PANITCH: And we always need to think of these international coordination relationships that states have with one another in relation to the balance of forces at home. These states aren’t acting just on their own or as ciphers of one portion of the capitalist class. They’re also always keeping an eye to what are the balance of class forces, especially what is the strength of the working class. Now, this also has to do, Paul, with what the other major capitalist states will do. They do look to the United States for leadership; the United States has carried that burden.</p> <p>But will they be able to coordinate the G7 and G20 in relation to capital adequacy in the financial system? Of course, in relation to trade agreements, free trade, above all, free capital movements. That’s what free trade agreements are really about. We’ll see some symbolic tariffs introduced, but there won’t be much. The big question is: can they keep, as they will want to keep desperately, free capital movements going, because that’s the basis of all of this finance moving around the world, but it also underwrites the integrated global production that Walmart and Apple are so dependent on. </p> <p>PAUL JAY: And, of course, while the Republicans and certainly many of the Democrats, they talk about public expenditure as being a problem because of the deficit and debt and so on, it’s really never been about reducing government expenditure. It’s really about where that expenditure goes, and some sectors of the Democratic Party see in their own political interest and a more systemic interest, you do need to put money into a social safety net, whereas Trump is clearly committed to, number one, making some deals with Paul Ryan on the social safety net, and, two, massive new expenditure on military, and this new infrastructure plan. But the way he wants to do the new infrastructure plan seems like it’s going to be a boondoggle for various billionaires and construction companies and so on. What do you make of his infrastructure plan? </p> <p>LEO PANITCH: Of course, he’s a developer. That’s what he does. And, as he has said repeatedly, he said, you know, it’s actually much easier to think big and build a major tower than buy a modest house in Queens. And what he means by that is that you do to that on borrowing, and you borrow big. And he is going to run the infrastructure program through public-private partnerships whereby construction companies and developers — and the developers have always been the backbone of the Republican Party right across the United States — will be issuing corporate bonds, or floating stocks, or going to the banks for loans, but all of which will be underwritten by the American state. </p> <p>PAUL JAY: Yeah, he’s talking about massive tax deferrals and such. </p> <p>LEO PANITCH: Massive tax deferrals, exactly, for doing this type of infrastructure investment. Whatever can be, of course, charged to consumers, will be charged, and the guys who then build it will be receiving the value of the payments — directly. Any of them go under, any of the cost overruns occur, the State will be expected to pick it up, and that’s the kind of capitalist that Trump has always been. He’s always been proud of being able to rip off the public sectors as much as he could in order to accumulate privately. That’s the mentality here.</p> <p>Now, one has to say that this type of shyster capitalism isn’t all of what Wall Street is, and indeed one does need to remember that, for the most part, they backed Clinton because they do understand the necessity of the type of regulations and codification and coordination internationally that we were talking about. That said, they too want corporate tax breaks. They, too, want personal tax breaks. And what we’ve seen since he was declared elected is the stock market booming precisely because these guys are expecting to be able to rake it in and estate tax done away with, capital gains tax done away with. Income tax, for that top 1% done away with. So, you know, they have conflicting interests. </p> <p>PAUL JAY: Yeah. I once asked a fairly insider, government insider, and also wealthy insider, during the Bush-Cheney Administration, why do the elites allow Bush-Cheney to have this adventure in Iraq when it’s clearly going to be a disaster in terms of foreign policy and geopolitics and they’re wedded to this crazy idea of regime change everywhere, and his answer was, “It’s very simple. They’re getting a free-for-all on the economic side. Anything they want. They want a regulation done away with? It’s done away with. They want a new law passed? They want a tax loophole? They just never made money like this before, so that’s all they care about, and whatever happens…”</p> <p>LEO PANITCH: Well, but I’m not so convinced, Paul, that the capitalist class and even traditionally the shyster capitalist class has had the degree of control over the geo-strategic military intelligence apparatus in the American State. </p> <p>PAUL JAY: But they allowed a situation… I mean, in– </p> <p>LEO PANITCH: Well– </p> <p>PAUL JAY: …in that… let me finish the point. They had a situation where you had a Cheney-Bush Administration that would not listen to the deep state, that didn’t listen to the normal controls over American geopolitical policy who were all against the invasion of Iraq– </p> <p>LEO PANITCH: By the time you put these guys in, it’s an illusion to think that capitalists can directly control them. These guys have their own dynamic, and we shouldn’t expect, even if wiser heads on Wall Street prevail, I’m not sure they’re easily going to be able to control this guy. </p> <p>PAUL JAY: Not this… not– </p> <p>LEO PANITCH: And I think that’s part of what we need to be afraid of. </p> <p>PAUL JAY: All right. Well, to be continued. Thanks very much for joining us, Leo. </p> <p>LEO PANITCH: Great to talk to you, Paul. </p> <p>PAUL JAY: And thank you for joining is on The Real News Network. </p> <h3>END</h3> <hr /> <p>This <a target="_blank" href="https://therealnews.com/lpanitch1128report">article</a> first appeared on <a target="_blank" href="https://therealnews.com">The Real News Network</a> and is republished here under a Creative Commons license.<img src="https://i0.wp.com/therealnews.com/wp-content/uploads/2021/11/cropped-TRNN-2021-logomark-square.png?fit=150%2C150&amp;ssl=1" style="width:1em;height:1em;margin-left:10px;"><img id="republication-tracker-tool-source" src="https://therealnews.com/?republication-pixel=true&post=124427&amp;ga4=G-7LYS8R7V51" style="width:1px;height:1px;"></p> Copy to Clipboard

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