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: