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Paul Jay and Robert Johnson discuss how the financialization of ‘the system’ and the economic despair about the future is fueling the far-right across the globe

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PAUL JAY: Welcome to The Real News Network. I’m Paul Jay. The election of Donald Trump has been hailed by far-right wing parties throughout Europe but this type of politics, this rise of the far right, is usually associated with very deep economic crisis. And certainly, we’re seeing that in countries like Greece and now in Italy and many of the other countries that are being hit by severe austerity in Europe. In the United States the economy, in fact, has been growing. Unemployment rates here are nowhere near the levels we’re seeing in countries like Spain and Portugal and, of course, Greece. The question is, is the economy here shakier? Is it weaker, more fragile than perhaps we’re seeing? Certainly, people following the stock markets and the heady news of the kind of money being made there. But is there in fact something darker looming and what explains the rise of such far right politics, not only in the United States, but as I say, in many places around the world? And now, joining us to discuss this is Rob Johnson. Rob is the President of the Institute for New Economic Thinking and served on the U.N. Commission of Experts on Finance and International Monetary Reform. He was formerly Chief Economist of the U.S. Senate Banking Committee and he was at one time, Managing Director for the Soros Fund Management in the 1990s. Thanks for joining us again, Rob. ROB JOHNSON: Pleasure to be here. PAUL JAY: So, this far-right rise in Europe is kind of understandable, given the depth and intensity of the crisis. And while a lot of people in the United States are not doing nearly as well as they’d hoped and expected, and in many places — and we’re in Baltimore — people are doing terribly. That doesn’t wholly explain why Trump is successful in making this appeal in the United States at this time. ROB JOHNSON: Well, I think there are two things to consider here. One is the static situation. Yes, you mentioned at the outset, unemployment is much higher in Europe than it is in the United States. There’s a lot of disguised unemployment or under-employment in the United States. People like Neil Hendry(?), who do a lot of work every month on the employment reports, believe the real unemployment rate is closer to 9½ to 10% than it is to 4.9%. And I think the number of discouraged workers and the number of people who are under-employed is still quite formidable. But that doesn’t explain all of it. I think this notion that Trump brought forward, “The System is Rigged,” it’s not really about the past, it’s really about their fears of the future. As wealth and income become more and more concentrated at the top, this money politics, is what I would call brazen and obvious. They fear that the rules of the game are going to keep changing so that they, and particularly their children, are going to do worse off than perhaps they’re even doing right now, that they have a gloomy outlook more than they have gloomy moments within the walls of their own home. PAUL JAY: How much do you think Trump and his team will strengthen the far right in Europe? ROB JOHNSON: Well it’s a question of Trump and his team taking action, versus Trump and his team serving as an example. Brexit served as an example. “All’s not right in the system” is what the British people brought forward. The groups like the IFD in Germany and the Golden Dawn and others are saying this whole system, this “politically correct system” is all pretending to broad-based and shared prosperity that’s all a lie. So, Trump sets an example as someone who called out a lie, so to speak, and received tremendous support relative to what many people thought his potential was. I’m going back a year now, not in the final days of the election. And so, his message resonated with truth, gives heart to leaders like Le Pen, and others in Europe on the far right, that their future is rising, that the people will hear them that they’re on the right track. I would also say that the strength that Vladimir Putin might achieve through his affiliation with Trump, and perhaps a decision what they might call giving him a sphere of influence, may allow him to be more aggressive and more divisive, potentially infusing cash and support to the far right. And I would also say, generally, propagandistic techniques that Trump used quite masterfully, appealing to the emotion, not to reason, frightened many people, but invigorate the vigor and conviction of people on the far right. And that will likely be emulated quite frequently now. PAUL JAY: The American response, like much of Europe, to the deep crisis of the 1930s was Roosevelt, the New Deal, you had Vice President Wallace, who you know, makes Bernie Sanders look like a centrist, and a real attempt to push a kind of social democracy within capitalism through the New Deal. Can you imagine such a thing emerging with the Democratic Party, especially now that finance is so much more powerful than it was in the ‘30s? Although, partly because of the Crash, I think they lost a certain amount of clout in the ‘30s. But finance is so powerful now and a section of finance has such control over the Democratic Party, is a Rooseveltian type response possible within the Democratic Party? ROB JOHNSON: I’d say the evidence of the response to 2008 suggests that it’s not. And the, how do I say, the diminution of the control of finance was hardly thwarted at all and the lobbying expenses were very, very formidable in the 2009-‘10 period as Dodd-Frank legislation was being considered. So, I would say it is a different structural era and no one stood up like Franklin Roosevelt did and said, you know, “I relish the hatred of my enemies”. PAUL JAY: Yeah, one wishes you would have heard those words from President Obama. ROB JOHNSON: Well, I think this financialization is even more profoundly a problem in Europe where they’re very dependent on a banking system, the ratio of bank assets or liabilities, meaning the scale and size of banks to the European GDP is much higher than in the United States where we depend more on securities markets. So, the system is a little more hostage to the health of banks. And as you’ve seen in the Euro-zone crisis, they’ve been turning countries inside out and pretending that it’s uncompetitive labor costs in the periphery that’s the cause or the source of their problems and preaching austerity. Well, my reading of that crisis is it was really about poor financial regulation, some misaligned incentives and a huge boom-bust cycle of capital inflow into the periphery. And then after Lehman Brothers shocked all the banks and made them tighten their balance sheets, all that money that went in, stopped and you had what Guillermo Calvo, the famous Latin American scholar, called a Sudden Stop. And then the capital came back out and instead of writing down debt in Europe, the political power of those institutions, particularly in France and Germany, was so formidable that they turned countries like Greece inside out and they established things with the IMF — the so-called Troika to fund paying back the banks and socializing the debt of the banks through the central banks. So what bankers should have written down — bad loans to peripheral Europe — essentially was transferred to the back of taxpayers and pitted German and French taxpayers against the potential write-downs that would ease the burden of Southern Europe. Nobody could transfer that much off of their balance sheets without tremendous political power. The real problem and dysfunction of banking, the massive moral hazard, is much more profound than even in the United States where it’s pretty egregious. PAUL JAY: The response often of this system structurally to political, economic crisis has been war and Trump has promised a massive reinvestment in American military power. He’s promised to crush ISIS. With the rhetoric against Iran, promising to rip up the Iran agreement and the type of people around him that he’s appointing from Flynn and Pompeo and others, the bullseye seems to be on the Iranian government’s back. What do you make of the potential for war with this administration? ROB JOHNSON: I think when somebody runs as a nationalist, an economic nationalist, a strong man, that’s there’s an awful lot of rhetoric. And a lot of that rhetoric will not be realized in actual policies. As I’m watching the transition team, I see a lot more conflictedness and divisiveness that Trump on some level was like the P.T. Barnum of the circus but he’s not actually one of the trapeze artists, or what have you, and the people who run the place will probably not be quite so aggressive. PAUL JAY: Well, Pence is certainly more aggressive on record and in rhetoric than Trump is and Pence seems to be the guy who’s going to run the place. ROB JOHNSON: I’d be very surprised if that was true. PAUL JAY: That Pence runs the place? ROB JOHNSON: Yes. He’s Vice President. I’ve never seen a Vice President run the place. I just don’t think that’ll happen. PAUL JAY: Well, it’s certainly, to a lot of accounts, that Cheney had enormous power within the Bush White House. ROB JOHNSON: Oh, that’s true. Yes, that’s true — on foreign policy, for sure. PAUL JAY: Yeah, that’s where I’m talking about and when they asked Pence who he models his Vice Presidency after, it was Cheney. And his language and rhetoric is much in the same vein as Cheney. ROB JOHNSON: Yeah, I was more familiar with Pence in his relationship to women’s reproductive rights. And, obviously, I’m on the opposite side of that issue from him, very clearly. But we’ll see what Trump does. I mean, Trump is a person who, what you might call, reads a room and tells a room what he thinks it needs to hear to get the room to respond to what he wants to do. And what he wanted to do was be President. Whether he’s, how would I say, wrapped up in a military-industrial complex that feeds itself with war-making or not, I’ll have to wait and see. That’s not really my area of expertise, either. PAUL JAY: Right. Well, he’s certainly surrounding himself with people that are. Alright, well, we’ll continue this when we see more of what Trump actually does. Thanks very much for joining us, Rob. ROB JOHNSON: Thank you. PAUL JAY: And thank you for joining us on The Real News Network.


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