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PostAppraising Trumponomics (Tor Guimaraes, USA, 10/16/20 10:24 am)
Since 2016 it was hopeful to hear our great stupendous President Trump saying that he was going to make a better relationship with China regarding trade imbalances and fairness. When he chose direct confrontation with China and our political military allies to improve trade deals, I first realized he was doomed to failure.
Indeed, the talk among honest experts is that he has failed. For example, Chris Rogers in the latest episode of the Yahoo Finance Electionomics podcast states, "The fact that he's gone to war with other countries and regions in trade has meant they've put tariffs on. So that's cut exports."
Others agree that Trump's tariffs on imports from China and many other countries in 2018 had predictable consequences: Most countries retaliated with their own tariffs on imports from the US. Trump's tariffs on about $355 billion worth of imports range from 7.5% to 25%. Just like a tax on the consumers, the American Action Forum estimates the cost of tariffs, including the loss of efficiencies, totals around $57 billion per year, which depresses growth at a time when Covid is taking a heavy economic toll.
Bottom line: The total US trade deficit in 2016 was $481 billion; the Trump "fix" to it for the last 12 months (through August) was $599 billion, or 25% larger than the year before Trump took office.
Since there's nothing inherently wrong with importing more than we export in total, most economists say it's more important to focus on having a robust manufacturing sector building high-value products, a sophisticated service sector, and the US consumers having strong purchasing power. Stupidly, Trump's advisors steered him religiously to reducing trade deficits. Now he is failing by his own metrics.
JE comments: How might we sum up Trumponomics? Can we say there even is such a thing? In many senses it's made up on the fly. Equal parts protectionism, tax cuts for corporations and the wealthy, and reduced regulations. Protectionism should lead to increases in domestic manufacturing, but there is not much evidence of this happening.
Anyone want to have a go at this question? Define Trumponomics in one paragraph or less. One should also allow for the massive stimulus packages we've seen at the expense of raising the national debt to 136% of GDP. That's nearly $30 trillion, or close to $100K for every human in this nation.
Thoughts on Balance of Trade, Autarky
(Eugenio Battaglia, Italy
10/17/20 3:29 AM)
I am a great fan of the WAIS posts from my good friend Tor Guimaraes, but this time (October 16th) I was perplexed by one sentence.
Probably this is due to the brainwashing carried out by our mainstream politicians/media, which in order to justify Italy's role of colony of the Empire and the so-called European Union, cite Italy's huge national debt of 136% of GDP (as in the US) and rising with the Covid-19 pandemic.
By the way, in 2019 Russia had only 16%, Japan 238%, China 47%, etc.
History shows that an Empire with a huge debt is doomed in the long run. The great strength of the US was not only that it was isolated by two oceans and weak countries on the north and south, but also because it could have/produce everything that it needed. A foolish idea is crossing my mind: Mexico cannot invade the US with an army but being smart it is invading the US with undocumented immigrants like the Africans and Asians are doing with Italy, but this is another story.
Therefore I am perplexed by Tor's sentence, "Since there's nothing inherently wrong with importing more than we export in total," or better the sentence is correct only if the commercial debt is compensated by other revenues such as transportation freight (but the US commercial fleet has been reduced), tourism (but in a pandemic crisis, the infrastructure of the tourist sector has become an additional debt), etc.
I believe that some autarky, especially for vital production, is necessary. After that, free trade is acceptable--seeking, however, a balance of imports/exports.
I know that autarky is now a bad word, so I will quote from the article "L'Autarchia e gli Sviluppi del Commercio Estero" by Carlo Conti on the Rivista Internazionale di Studi Sociali, March 1940 edited by the Catholic University of the Sacred Heart in Milan:
"Autarky does not condemn international trade, but aims rather at rendering it reciprocally more convenient. Besides, it strengthens their base through a more rational valuation of the energies and resources of the interested countries in a wider field of international possibilities."
JE comments: For the last half-century, autarky has indeed become a bad word. Now we associate it with dysfunctional nations like Cuba and North Korea. I once read however that autarky is practiced everywhere--on a little sphere known as Planet Earth. The Conti quote above is rather confusing, but I think it says that autarky is good and doesn't necessarily preclude international trade. Can we derive any lessons from this 80 years later?
Crises tend to bring out calls for autarky. An example: the lack of domestically produced equipment to combat the pandemic. But then the crisis subsides, and we forget.
- Defining Trumponomics (Tor Guimaraes, USA 10/17/20 4:10 AM)
Commenting on my last post, John Eipper asked, "How might we sum up Trumponomics? Can we say there even is such a thing? In many senses it's made up on the fly. Equal parts protectionism, tax cuts for corporations and the wealthy, reduced regulations..."
My definition of Trumponomics: A personal set of social political economic policies, whereby the primary objective is to encourage or execute, legal or illegal activities expected to quickly produce massive wealth for the leader and his friends. Because traditional science-based national economic policy is designed for the benefit of the nation, it conflicts directly with Trumponomics regarding the ultimate results from protectionism, tax cuts for corporations and the wealthy, environmental destruction, etc.
Thus, only by incessant hiding, obfuscation, confusion, misrepresentation, misdirection, and bullying of anyone seeking the facts, the leader repeats that all is going extremely well to hide the yawning gap between the leader's fleecing motivation and the national interest.
JE comments: Rather critical, I'd say. (!) One curiosity: Is Trumponomics entirely new, or is it a modern twist on the caudillo/strongman economic policies of yore--meaning, an amalgam of populism, nationalism and cronyism, with the foremost goal of gaining personal advantage?
Latin America may provide some lessons on this. Tor, do you see any precursors of Trumponomics in Brazilian history?
Does Trumponomics Have a Precursor?
(Tor Guimaraes, USA
10/19/20 4:18 AM)
John Eipper commented on my post of October 17th: "Is Trumponomics entirely new, or is it a modern twist on the caudillo/strongman economic policies of yore--meaning, an amalgam of populism, nationalism and cronyism, with the foremost goal of gaining personal advantage? Latin America may provide some lessons on this. Tor, do you see any precursors of Trumponomics in Brazilian history?"
America, by supposedly being the land of the free and home of the brave, freedom, democracy, exceptionalism, etc., seemed immune to Trumpism or Trumponomics. Up to now the latter, aka "Trickle-down economics" in a much milder form, has been often well disguised in developed nations around the world in many different forms. But it occurs whenever and wherever leaders squeeze their own people to enrich themselves and their partners.
As defined in an earlier post, the term "Trumponomics" represents a set of personally focused social political economic policies which have been responsible for countless wars, financial crises, etc. all over the world, including Latin America. Quite obviously, Bolsonaro today provides a perfect example for this phenomenon in Brazil, but history has many similar cases but never made so shocking by an added scourge like Covid-19.
I wrote before on this Forum, that I believed Trump could be good to America because his blatantly careless style about so many serious things would allow the masses to make a connection between Trumponomics and the realities on Main Street. In that fashion he could provide a unique, and perhaps his only, service to the American people. That is turning out to be the case, except despite all the evidence, a significant proportion of Americans (Christian Fundamentalists and White Supremacists at the forefront), insist on advancing their Trump-based agendas.
JE comments: Tor, are you saying that Trump's biggest contribution to society is a wake-up call; meaning, see what you get when you elect a guy like Trump? Comparisons of Trump to Latin American caudillos tend to focus on their authoritarian style, jingoistic nationalism and cult of personality. They omit the economic component, which tends to cloak personal ambition in a veneer of populism. Here's a recent example from Mexican academic Jorge G. Castañeda:
- Defining Trumponomics (Tor Guimaraes, USA 10/17/20 4:10 AM)