President Trump will attend the World Economic Forum in Davos, days after introducing significant tariffs on Asian imports. However, these tariffs and Trump’s overall economic agenda won’t challenge the world’s elite at Davos, says Prof. Leo Panitch
GREGORY WILPERT: Welcome to The Real News Network. I’m Gregory Wilpert coming to you from Quito, Ecuador. The world’s corporate and political elite are gathering for the 48th Annual World Economic Forum in Davos, Switzerland this week. To the surprise of the organizers, President Donald Trump will be attending this year. This is the first time since 2000, when Bill Clinton went, that a US president participates. Trump’s participation is particularly surprising because he usually portrays himself as being anti-free trade, quite a contrast to the WEF’s pro-free trade agenda. Trump’s speech to the WEF is scheduled for this Friday.
Most reports about this year’s WEF portray the gathering as being more optimistic this year than last year. Back then, the growth of right-wing movements in France, Britain, Germany and the US made the WEF elite uneasy. This year, though, the focus is on economic growth, which according to the latest IMF report, has not been this positive since 2010. Joining me to analyze the Davos meeting in this context of Trump and the global economy is Leo Panitch. Leo is a Senior Scholar and Professor Emeritus of Political Science at York University in Toronto. He’s the editor of the recently released issue of The Socialist Register for 2018, titled “Rethinking Democracy.” Good to have you back with us, Leo.
LEO PANITCH: Hi, Greg. Glad to be here.
GREGORY WILPERT: So, we don’t know yet exactly what Trump will say at the WEF on Friday. However, this Monday he did introduce a new set of tariffs on imports to the US, particularly for solar panels and washing machines and that appears to affect mostly Chinese and South Korean imports. In other words, he seems to be fulfilling his anti-free trade agenda. How do you expect Trump to be received, the billionaire President among the world’s pro-free trade elite?
LEO PANITCH: Yes, it’s really astonishing. I don’t think Trump has been to Davos as a capitalist, has he? To my knowledge, not, and the fact that he wasn’t there indicates how the world’s ruling classes of the various nation-states regarded him as a shyster, that he wasn’t in their league, if you like. The fact that he’s going there now as President of the American empire is an entirely different thing, of course, and no one can afford to ignore him. You’re right that going on in the wake of having imposed these very high tariffs on solar panels and washing machines, which is directly aimed at Asia, is significant and ironic and will send a certain frisson amongst the people who gather there from the world’s multinational corporations, the heads of the international banks, and their political sidekicks from the various nation-states around the world.
You know, does he have a free trade agenda? One has to be careful with this. I mean, he is definitely throwing some sand on the free trade roads, but let’s remember that free trade agreements are primarily about the free movement of capital, and the free movement of financial services and corporate services: lawyer services, consultancies, etc. You know, the tariffs are not so significant any longer in the context of free trade. The great irony of him putting on the solar panel tariff is that the company he is protecting most is an Atlanta company that is owned by Chinese capitalists, so he’s putting tariffs on to protect Chinese capital that has invested and is employing people in the United States, while getting in the way of American capitalists who produce solar panels in Asia and import them to the United States.
So this is a very convoluted and mixed-up stance that Trump is taking, and I think that will seed some confusion in Davos, but I think for the most part they will see him as someone who’s operating in their interests. What matters most to them is that he’s come through, and the Republicans have come through, with this grotesque tax cut to the largest corporations and richest people on the face of earth. In that way, they will see him as a loose cannon, they’ll be shocked to some extent by his inconsistencies and vulgarities, but I don’t think they see him as someone who’s about to undo global neoliberal capitalism.
GREGORY WILPERT: I want to dig in a little bit more into that in a minute, but before we do, I just want to focus a little bit more on these tariffs. I mean, do you think that this increase or this imposition of tariffs on these Asian products means that a trade was with China is about to begin?
LEO PANITCH: No, I don’t. I don’t think either China or the United States are oriented in that direction. China most certainly not, and it doesn’t have that many American imports to get in the way of, in terms of a trade war. It could do more, of course, to prevent the influx of American capital into China, but that’s unlikely as well. And of course, what the Americans are pushing for is ever more access of American financial capital, American banks into the Chinese financial markets, including those that provide credit to small and medium enterprises, state enterprises, and even the not insignificant number of Chinese who are now living on credit.
So I really don’t think that this is happening. I think that picking these two particular things is meant to be exemplary. It is intended to throw a bone to Trump’s base, or at least those who naively thought that he would be able to protect the lives of working class people in the United States in any significant way. But I don’t think his foretells a major trade war between China and the United States. I mean, Walmart, the largest company on the face of the earth, America’s most significant domestic corporation outside of the electronic-internet corporations, imports most of what it sells from China. There’s no indication that this is about to be undermined by this administration.
You know, they need to keep certain balls in the air in order to facilitate the appeal they made to insecurely employed or unemployed … although there aren’t as many unemployed as one might think in the United States … working class people. But no, I really don’t think it’s a trade war, as indicated by the fact that who he’s protecting are Chinese capitalists who are producing in Atlanta, while getting in the way of American capitalists who are producing in Asia.
GREGORY WILPERT: Just returning also to the WEF again. Just before the WEF began, the IMF issued one of its most optimistic global economic outlook reports. It expects the world economy to grow by 3.9% in 2018, as well as in 2019; however, there are some who are warning that there are dark clouds on the horizon, such as the unabated growth in inequality and also, from a financial point of view, the halting of central bank policies, loose money policy that is known as quantitative easing, which had injected trillions of dollars into the global financial system. So what do you think? I mean, are those attending the WEF right to be optimistic about the future, as far as the global economy is concerned, or should they be more concerned about what is going on, on a global level?
LEO PANITCH: Well, it does appear that the waves of crisis that we’ve experienced over the last 10 years, that is, the financial crisis kicked off in the mortgage market in the United States, which threatened to bring down all the world’s banks who’d invested in it, began in 2007, really, and then exploded in 2008. That was prevented from becoming the great global depression, a repeat of the 1930s, by the coordinated stimulus that was organized with the G20 heads of state under the rubric of the American Treasury in 2009, the largest peacetime stimulus in history by the United States, and the same on the part of China. China’s was even bigger.
But no sooner had that prevented the crisis turning into a great depression, it kicked off, it was followed by the Euro crisis, which lasted through the better part of the last decade in the European Union. And then that was shortly followed by the commodities crisis, which people in Latin America, as you know very well, Greg, particularly suffered from, in terms of all of the raw materials exports they’d been sending to China. The fall in commodity prices, the fall in trade around commodities. What is now happening, and it’s been on the cards the last couple of years, is we are seeing global economy come out of that successive series of crises, and the fastest growth is taking place again in Asia, although nothing like the rates of growth that previously existed in India and China, and that’s to be expected. You know, Japan had phenomenal rates of growth in the 1950s. It went down in the ’60s and further down in the ’70s, although it was higher still than the advanced capitalist countries.
And we’re seeing that in Asia as well, but that’s where most of the growth is. That said, the United States, amongst the G7 countries, recovered most quickly out of this crisis. The rate of unemployment is very low in historical terms, although the extent to which people are participating in the labor market has not yet fully recovered, but it is low. So the United States is ticking over well as well, just in basic GNP growth terms, and Europe is now starting to as well, with the exception of the United Kingdom because of Brexit.
So this is significant, and it looks like we’ve lived through a decade of economic crisis of global proportions, and it looks like that’s coming to an end. Now, this is in an irrational, unplanned, chaotic, as well as vastly inegalitarian and exploitative global capitalist system. This kind of system is constantly volatile and is constantly throwing up contradiction, so it’s impossible to say that this is going to go on forever, and indeed, the chief economist of the IMF warned at Davos that one, this doesn’t mean that there won’t be another recession. There is some danger, as you say, as quantitative easing is ended and interest rates are gradually increased, although the central banks are doing this very, very cautiously.
There’s some danger, especially insofar as the Trump administration removes some of the regulations on the systemically important banks in the United States, and indeed, the large ones outside of the United States, there’s some danger that there might be another financial crash again, and the danger there is that in this administration, where the Treasury as well the State Department has not replenished its full staff since the inauguration of Trump, and moreover, the quality of staff, even in capitalist terms, is not very high, that the American state won’t be able to contain crises as it did before, prevent them from cascading into global crises or cascading into great depressions. That’s been the role of the Treasury and Federal Reserve, acting as global financial institutions.
So all of this is, of course, unpredictable, and of course, capitalists are constantly looking at risks of this kind and trying to compete with one another, outperform one another, in terms of guessing … whether it’s a matter of productive demand or whether it’s a matter of financial speculation … of guessing correctly in this world of irrational risks.
GREGORY WILPERT: I just want to address also another issue that came up in The New York Times recently. On Monday, they published an article with the headline “Populism Is Waning, Which Is Reason To Party in Davos”. By populism, of course, the article’s actually referring to right-wing extremism in the form of Marine Le Pen in France, the AfD in Germany, the Brexit vote, and Trump in the US. Now, what do you think? Has right-wing populism been defeated or, as perhaps Trump’s visit to the WEF might indicate, is it finding an accommodation with the forces of the WEF and neoliberal globalization?
LEO PANITCH: Yeah, I think that was an interesting article. I don’t know that they think it’s waning. I don’t think they can be so relieved, hardly, with Donald Trump there, who represents this most vividly and most notoriously and most grotesquely. Populism in general needs to be understood as an appeal to the masses, to the working classes, to farmers, to peasants, etc., of a kind which targets the existing political and economic establishment, derides them, denigrates them, engages in promises to make those people’s lives better, but does nothing to organize and mobilize them as powerful social forces from below. It’s an attempt to ride on the discontent of the great mass of people in a way that doesn’t increase their power vis-a-vis either the populace or the existing establishment. And to some extent, it may actually involve decreasing their power, insofar as it disorganizes their organizations, whether it’s trade unions or farmers’ movements or what have you.
That type of populism is very different from left populism, of the kind that the Davos people would identify Jeremy Corbyn as representing, or Bernie Sanders as representing, which is explicitly oriented to motivating, educating, and organizing forces from below. So it’s a very different type of populism, and I think the ruling classes in Davos are as worried about the right-wing version as the left at the moment. But in the long run, they will always be much, much more worried by the left, because it may be oriented, and often is oriented, at taking away their private property, taking away their capital, taking away their means of production, distribution, and exchange, which they use to exploit people.
That’s not the case with right-wing populists, for the most part, as Trump obviously shows. That said, the danger is that they’re playing with nationalist fire. Since globalization doesn’t involve bypassing nation-states, all of the ruling classes, political establishments in each nation-state who have bought into neoliberal globalization have had to coexist with a reproduction of national identity, a legitimation of the notion of the national interest, even as they’ve opened up their economies, their societies to the free movement of capital, to treating foreign capitalists the same as domestic ones, etc. By reproducing that national consciousness, they have, in the wake of the delegitimation of neoliberal globalization, they have allowed, left the door open, for a nationalist populist type of rhetoric and politics that we’ve seen in the United States, in Germany, in France, in Eastern Europe most explicitly, etc.
You know, they’re afraid of that, because the danger is that they will not be able to control some of the figures who may indeed turn out to be the kinds of nationalists who would turn inwards. We have no evidence that that is happening yet. We don’t even have evidence that in Hungary and Poland that is happening. What they are doing, of course, is behaving in an extremely ugly manner vis-a-vis the human rights of refugees, of migrants, and indeed of minorities who have been in their societies as significant elements for millennia, not least the Roma and so on.
So, you know, this is something that’s distasteful to them. This is something they look at carefully, but I don’t think that they think it’s over either. I don’t think they think it’s all over. They’re probably more afraid now by what Corbyn represents than the danger that Le Pen appeared to represent, but I don’t think they think it’s over.
GREGORY WILPERT: Okay. Well, we’re going to have to leave it there for now. I was speaking to Professor Emeritus of Political Science at York University, Toronto, Leo Panitch. Thanks again for having joined us today, Leo.
LEO PANITCH: Great to see you again, Greg. So long.
GREGORY WILPERT: So long, and thank you for joining The Real News Network.