Trump vs. Democracy

The US House of Representatives marked a milestone today as it decided to report out articles of impeachment on Trump. But there’s a bigger picture to consider. The impeachment represents a new stage in the political ‘food fight’ between the two wings of the political-economic elite in the USA. It also represents a further escalation in the crisis and decline of American Democracy–a decline that’s been going on since at least the early 1990s, when Newt Gingrich and the radical right took over the House and declared publicly their strategy was to create a dysfunctional US government. In retrospect, Gingrich has certainly succeeded.

But it’s not just since Newt. US Democracy has been in decline on a number of fronts since the 1970s, which corresponds with the rise of Neoliberal economic policies. Late stage Neoliberalism today is in crisis. Since the 2008 crash political elites and policy makers have been attempting to restore it to its pre-2008 momentum but have failed. Obama failed. Trump’s regime should be viewed as an attempt to restore it in a new, virulent aggressive Neoliberalism 2.0 form. Trump has been only partially successful to date as well, and will likely fail as well regardless of the 2020 election outcome.

A new crisis is around the corner in 2020, driven by accelerating fundamental changes in the nature of capitalism itself. At least three forces will further exacerbate the internal contradictions within the neoliberal policy regime. They include the deepening of Artificial Intelligence technologies that will further devastate and already rapidly changing labor market, eliminating or reducing tens of millions of simple decision making jobs. It will radically transform as well product markets and distribution systems of 21st century capitalism. It will change the nature of money itself. All these trends are already underway and will continue to intensify in the years immediately ahead. Neoliberal capitalism will also not be able to resolve the climate crisis, also accelerating. Third, it has already generated a level of unsustainable corporate, financial, household and government debt which inevitably must lead to financial markets imploding the next decade.

As these basic material forces generate a long term crisis, contradictions within the neoliberal policy regime continue to intensify as well. The four elements of Neoliberal policy–or Neoliberalism in practice–are Fiscal, Monetary, Industrial and External (trade, money capital flows, currency exchange rates, and the twin deficits). What’s been happening since 2008 is that the advancement of neoliberal policy in one or more of these four elements negates the restoration or advancement in one or more of the other three. The contradictions within Neoliberalism are intensifying, in other words, just as more fundamental technological and capitalist system changes are developing as well. The outcome next decade will likely be a major global economic crisis, the dimensions of which will make the 2008-09 event pale in comparison.

In order to advance, deepen, and expand Neoliberalism has had to limit and eliminate elements of Democracy. Neoliberalism and Democracy, even in the limited American form of Democracy, are essentially incompatible. The historical record since the 1980s confirms this. On a number of levels, as Neoliberal policies have advanced, Democracy has atrophied. This is not by accident nor a mere correlation.

Moreover, the decline of Democracy has accelerated since the 1990s, and especially so after 2000. It is evident in the collapse of any semblance of campaign finance reform, in the transformation of the two political parties into vehicles increasingly of corporate and investor wealth subsidization, in the assertion of the Supreme Court to interfere with electoral processes and to legally enable corporate-investor political influence, in the spread of voter suppression by various means (i.e. a new Jim Crow also endorsed by the Supreme Court), widespread gerrymandering, a greater role played by the electoral college to prevent popular sovereignty, passage of special courts in free trade treaties that negate popular sovereignty, attacks on civil liberties (patriot act, NDAA spying and surveillance, etc.) and guarantees of the Bill of Rights, a transformation of the so-called ‘fourth estate’ of media-press into vehicles of ideology, a transformation of the two political parties into institutions more tightly controlled by money interests–the list is long and growing (and deepening). With the crisis of 2008-09 the process of Democracy decline in America has been accelerating.

And that process has reached a new milestone with the articles of impeachment of Trump forthcoming. For the behavior of Trump has clearly violated numerous provisions of the US constitution. What we have under Trump is an assault on Representative government and the formal institutions of Democracy, as limited as they may already be.

Make no mistake, however. This development reflected in Trump’s regime is not an isolated, individual event. Trump’s attack on Democracy is just the latest stage of the assault on Democracy that has been gaining momentum under Neoliberalism since the 1980s, accelerating after 2000 under George W. Bush, and intensifying in the post-2008 period even further.

And it’s going to get worse in 2020 in the run up to the 2020 November election. It is not alarmist to project that the 2020 election will be close. Trump probably has an electoral college advantage, even if he loses the popular vote by even more than he did in 2016. Behind him is a sycophant Republican party and a base of at least 30% of the population that would vote for him regardless of any crime he might commit. He has his ideological bullhorn in Fox News, Breitbart, and Twitter and he will use it, increasingly aggressively. Should he lose the election, chances are more than even he will refuse to acknowledge that loss. Should he win it narrowly, he will likely turn vindictively against those who opposed him. He is a ‘down and dirty’ street fighter, weaned on the corrupt and questionable practices of New York commercial property speculators. In short, there will likely be a constitutional crisis circa the November 2020 election, the likes of which are comparable only to the 1850s American political debacle. (Trump himself has said if not elected there will be a ‘civil war’ again in the USA).

American Democracy and the US system is about to enter a period of instability it has not witnessed since the early 1930s. Hold onto your seats, folks, the real show hasn’t even yet begun!

The following passages summarize my views on the deepening contradictions of Neoliberalism and its fundamental incompatibility with Democracy in the era of Trump. It is an excerpt from the concluding chapter, ‘Neoliberalism v. Democracy’ in my recently published book, The Scourge of Neoliberalism: US Economic Policy From Reagan to Trump, Clarity press, January 2020). It illustrates how Trump’s regime reflects an intensifying assault on Democracy in America, the latest stage of that incompatibility of a new aggressive, virulent form of Trump Neoliberalism with Democracy in America as we’ve known it.

Trump’s Assault on Democratic Government, Chapter 10, The Scourge of Neoliberalism, by Dr. Jack Rasmus

As Neoliberalism has become more aggressive under Trump, so too have the attacks on democracy and democratic government.

After three years in power, and with the House of Representatives and much of the mainstream media challenging him after the November 2018 elections, the President is clearly drifting toward usurping the authority and, in some cases, even the functions allocated by the US Constitution to Congress—specifically to the US House of Representatives—toward a view he is above the law and unimpeachable. Toward a view that his presidency is more than a ‘co-equal’ branch of government. Toward a view he can and should govern when necessary by bypassing Congress. Toward a view the Constitution means he can force states to abandon their rights to govern. And toward a view the president can publicly attack, vilify, insult, coerce, and threaten opponents, critics, and whomever he chooses.

That drift includes the expansion of Executive branch rule-making at the expense of Congress and the legislative branch; the broadening use of ‘national security’ declarations by the president to bypass Congressional authority; and the refusal to recognize US House authority as it exercises its Constitutional responsibility to undertake investigations of corruption in the executive branch.

    Usurpation of Legislative Authority

Presidential rule making by Executive Order has been long embedded in the US political system. In the past, however, Executive Orders by presidents have been issued where the president clearly has authority to issue such, or else in cases where Congress has not passed specific legislation—such as Obama’s EOs enabling children born in or brought to the US by non-citizen immigrant parents to have deferment from deportation . EOs have not been typically issued, however, that directly change the intent or the funding authorization of legislation passed by Congress. Not so in the case of Trump.

Passing laws requires their accompanying funding authorization. The monies allocated to a program by Congress are required to be spent on that specific program. However, under the cover of invoking a national emergency, Trump recently unilaterally transferred money allocated by Congress and authorized by the US House for defense spending to fund his border wall. This creates a dangerous precedent. Might Trump now divert authorized spending by Congress to other programs? This is clearly a constitutional issue now. Trump is in effect governing by ‘national security decree’ in direct challenge to Congressional legislative authority. The much heralded ‘separation of powers’ in US government has been undermined to a degree.

    Drift Toward Tyranny

In addition to expanding Executive rule-making at the expense of Congress and the legislative branch, and his refusal to cooperate with Congressional subpoena and investigation rights under the Constitution, worrisome signs keep arising that indicate Trump also considers himself personally ‘above the law’.

The US political system has always given the President authority to pardon individuals, which is usually undertaken at the end of their term in office. It’s a curious and decidedly un-democratic practice that has been increasingly institutionalized in recent decades under Neoliberalism, by both Republican and Democrat presidents and governors. A hallmark of American political ideology proclaims to the public that ‘no one is above the law’. Yet, some are, as executive pardons have become increasingly commonplace. But these are presidential (and governor) executive pardons of others. No president to date has publicly suggested that he himself might be above the law or has the right to ‘self pardon’. But Trump has.

The process of usurping legislative authority, to fund his preferred programs at the expense of Congress, may have just begun, but the drift by Trump toward an imperial presidency in domestic legislation may well expand as his confrontation with Congress grows. Second, his suggestion of the right to assume power of self-pardon smacks of Tyranny. These trends—toward usurpation and tyranny—represent decided undemocratic principles that the president feels comfortable with.

Although in early form, the trends suggest a view by Trump that the presidency is an institution ‘more equal’ than the other branches of government. It has long been obvious that, in foreign affairs, the presidency since the 1960s—and even before—has been becoming more ‘imperial’. Presidents go to war without obtaining a war declaration by Congress, as was clearly intended by the US Constitution—token limits by the 1970s era ‘war powers act’ notwithstanding. The Trump presidency may reflect an extension of this imperial attitude to domestic US politics, i.e the emergence of what might be called the imperial presidency in domestic affairs.

Redefining Separation of Powers

    The Trump presidency’s disregard for Constitutional norms in its relationship with Congress, and in particular the US House of Representatives, has recently become evident as well in Trump’s outright refusal to allow executive branch employees to testify to Congress, subpoenas notwithstanding. This stonewalling is but another example of the Trump presidency’s view that the Executive and Legislative branches are perhaps not ‘co-equal’ under the Constitution. Constitutional authority clearly provides the US House with investigative powers. Trump’s refusal to cooperate with that Congressional authority represents yet another reinterpretation of Constitutional separation of powers.

    Reinterpreting the Supremacy Clause

Trump’s offensive against California’s auto emissions rule exemplifies his reinterpretation of the Constitution’s ‘supremacy clause’ and states’ rights. It has long been accepted that state laws cannot provide less than a similar federal law. For example, states cannot pass a minimum wage lower than the federal minimum wage. But they can pass legislation providing more than the federal minimum wage. Trump’s attack on California emissions in effect means the state cannot pass tougher emission standards than the federal standards, which are far less stringent. If that becomes a legal precedent, states logically could not pass legislation that is either less than or greater than the federal requirements. It’s a violation of the federalism principle in the Constitution.

Assuming the Power of the Purse

    Trump’s trade wars represent yet another example of Executive powers expansion. The trade wars have generated tens of billions in additional tariff revenues for the executive branch. These funds have been used in part by the president to issue direct subsidies to US farm interests in the amount of $28 billion over the past year. A constitutional argument can be made that payment of subsidies in such amount should be authorized only by legislation raised and authorized by the US House. The Constitution’s intent gave the US House the authority of ‘power of the purse’ to raise and authorize spending of revenues—and not the Executive.

    Disregarding Democratic Norms & Practices

Other disturbing examples abound of the Trump presidency disregard for accepted democratic norms and practices.
Never before has a president so blatantly attacked the press and media that criticized him. Or vilified political opponents as ‘traitors’ and ‘criminals’; or publicly demanded candidates be ‘arrested and locked up’; or incited popular mobilizations against protestors and his critics; or launched purges within his own bureaucracy (in particular the intelligence agencies) and political party; or declared if Congress were to try to impeach him it would mean a new civil war in the country. These are not just the verbal railings of an aberrant personality who by chance attained the highest office of US government.

These are actions that reflect a calculated and fundamental disregard for even the limited form of democracy that still prevails in US government institutions today. They are views that reflect a belief that Executive powers of the president should and must be expanded—even if at the expense of the authority of legislative branch of government (Congress or states); even if it at the expense of the legitimacy of the press and ‘fourth estate’; even if it deepens the polarization of US society and incites citizen to citizen violence. Trump believes it is all necessary in order to implement his policies and programs—and this is what we must keep foremost in mind—it’s a Neoliberal program.

The key question for assessing the future of Neoliberalism is whether Trump is a product of the evolution of Neoliberalism and its impact on political institutions and practices—or whether the Trump presidency is an aberration outside that evolution?

Trump: Inevitable or Aberration

    Is a Trump-like political figure the inevitable consequence of the need to introduce post 2008-09 a more aggressive, virulent form of Neoliberalism? Would an alternative president have to have moved in the same anti-democracy direction to get his/her agenda passed in the era of deepening domestic and global opposition to Neoliberalism? Perhaps that alternative president might have been less crude, less brash, less apt to ‘shoot from the hip’ on policy and political initiative—less likely to engage in early morning social media excesses; and indeed therefore have been even more clever and effective.

    But one should make no mistake. Trump is not a lone wolf who slipped into the US presidency by accident or ineptitude of his opponents. Neoliberalism required a more aggressive restored form following the crisis it faced in the wake of the 2008-09 crash. Certain moneyed interests were in 2016, and are still, behind Trump. And if it wasn’t him, it would have been another chosen to shake up the old political establishment that was beginning to lose control over growing discontent at home and growing capitalist competition abroad.
    The problem with Trump in the end has been his style, which has made it impossible for him to unite US business interests, and the traditional political elites, behind him in an effort to jointly restore the Neoliberal policy regime. Instead, he has precipitated an internecine political fight within the ruling class in America—i.e. a classic post-crisis political ‘food fight’ between two wings of the American economic and political elite.

    A similar post-crisis split and internecine ruling class conflict has been occurring globally elsewhere as well—not just in Trump’s America. In the UK (Brexit), in France (the National Front), Germany (the rise of Afd), in several eastern European countries (Hungary, Austria, Poland), in various countries in Latin America (Argentina, Brazil, Ecuador), and in Asia in India and Philippines. All are trying to come to terms with slowing economies and an emerging global recession, as Neoliberal policies failed globally after 2008-09, giving rise to right wing autocrats and anti-democratic politicians. And in virtually all cases, including the US, in attempting to re-establish Neoliberalism on firmer ground, democracy, democratic norms, and institutions have been the victims.

    The Trump era represents only the deepening of anti-democracy trends in the US that have been evolving since the introduction of Neoliberal policies circa 1980. In the Neoliberal era the two mainstream political parties became more oligarchic in their programs and representation. Money deepened its hold on government and politics steadily over the decades. Electoral processes became more the purview of the rich and powerful. Gerrymandering and voter suppression became more the norm than the exception. Popular sovereignty and representative government for all, more a fiction than fact. Public wants and needs that can only be fulfilled by government have been increasingly ignored, in favor of interests and requests of tens of thousands of paid lobbyists. And citizens’ civil liberties and rights have been increasingly limited, circumscribed, and surveilled.

    The correlation between the rise and expansion of Neoliberalism and the decline of democracy in the US is irrefutable. Whether the correlation also represents a direct causation depends on whether each milestone event associated with the expansion of Neoliberalism occurs in tandem with, or in consequence of, an event marking a further deterioration of democracy.

    And here the evidence and examples abound: the transformation of the political parties in the 1980s and early 1990s and rise Neoliberal tax and monetary policy. The radical right takeover of the US House in 1994 and advent of free trade. Gore v. Bush, the selection of the president by the judiciary in 2000 and still more tax cuts, war spending, the end of campaign finance reform, the Patriot and NDAA Acts and the attacks on civil liberties and democratic rights, and free trade treaties with their capitalist courts and negation of representative government. Thereafter, Obama followed by the Supreme Court’s Citizens United and related decisions, widespread gerrymandering, intensifying voter suppression, more war spending, more business tax cuts, more deficits, more free money to investors and bankers, more attacks on unions, more wage compression. And now Trump.

    It’s more than just a ‘smoking gun’. It’s certainly not just coincidental that democracy in America has been in decline—and on so many fronts—during the era of Neoliberalism. Nor is it coincidental that under Trump the decline of democracy in America has intensified, and has begun to assume an attack on the prevailing constitutional form of government itself.

    Jack Rasmus is author of the just published book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity press, January 2020. (The book is available at discount from his blog, jackrasmus.com, and his website, http://kyklosproductions.com, where reviews of the book are also available.

The following are some of my Twitter posts for the past month of November 2019. Brief takes on events, surveys, reports, and matters of interest on US and global economy and politics–including trade wars, the Fed, healthcare costs, US wages & productivity, recession, and commentary on Trump and Democrat political candidates for President.

Dec 2

Trump reinstates tariffs on Brazil/Argentina steel. Why? USMCA trade deal frozen + China mini deal in trouble. So open trade wars elsewhere to divert attention from failing trade policy. Besides, how dare Brazil-Argentina dare cut deals on soybeans & wheat with China!

Dec 2

Wave of Bloomberg TV ads now hitting all sections of country as he launches his presidential bid. Details suggest he’s more ‘left’ than Warren and a flaming NY progressive. But billionaires say what they think folks want to hear, then deliver for the rich (aka Donald)

Nov 27

A report just released by NY Fed concludes US consumers & businesses are paying for Trump’s 25% China tariffs. Tariffs cost them $40B a year, per Fed. Trump’s 25% tariffs should=20% cut in China prices on US imports if China were paying. But China prices fell only 2%

Nov 26

Obama comes out publicly against ‘left’ wing of party (Sanders-Warren) & on behalf of corporate wing of party as it seeks a backup to Biden & tries to stop Sanders-Warren. Obama always part of corporate wing, financed in 2008 by real estate, Chicago $, & NY hedge funds

Nov 26

Billionaire Bloomberg enters race for Dem party nominee. Latest in moneybag wing of party to bet on ‘brokered convention’, as Biden fades as their choice. Their strategy now is stop Sanders-Warren on first vote at convention, then push their ‘centrist’ to nomination.

Nov 26

Chair Powell says US labor mkt strong. But monthly job gains now half that of 2018, even with tens of thousands of current census job & holiday hires. Watch for big job contractions early 2020, when census & holiday hiring stop/reverse. Then watch consumer spending plummet

Nov 24

New darling of moneybag wing of the Dems. Backup if Biden fails. But who’s really funding ‘Butt’? Finance capitalists like Paul Tudor Jones & other shadow bankers. Deja vu, like when Chicago money & NY hedge funds pushed Obama into the race at the last minute in 2008.

Nov 20

Signs growing that Trump’s Phase 1 mini-trade deal with China may not get signed off by Dec. 15. Trump getting nervous. Financial markets too, returning to pre-deal safe havens of US Ts. Should deal not get signed Dec. 15, watch for financial markets’ sharp contraction

Nov 19

Institute Int’l Finance says global debt rose from $78T in 2008 to $250T today. Debt can rise if income gains cover principal & interest; or if P&I is paid by raising more debt. Crises begin when income falls & debt refi freezes up. It’s a debt driven economy-until it’s not

Nov 16

What’s different Trump v. Nixon impeachment?: Fox news, social media, Trump Sup. Court majority, sycophant Republican party, strategically inept Dem Party leadership, no recession, 2yr before elections. As someone said: “First as tragedy; second as farce.”

Nov 12

New Gallup poll finds 34% adults know a family or friend who died last 5 yrs because couldn’t afford health cost. 17% of adults under 45 knew of family or friend who died because of unaffordable cost (compared to 6.6% adults over 65 who knew. Medicare for All anyone?)

Nov 12

Trump & US media keep saying US wages rose ave. 3.1% this past yr. But US Labor Dept. data show real median wage Dec 2016 at $10.70/hr. Same wage rose by Sept. 2019 only $10.96/hr. That’s 9 cents/yr & well less than 1%. Maybe managers, tech, professionals got 50%+ raises

Nov 11

10 yrs of Obamacare+Trumpcare results: Employer health ins. premiums up 50% + premium prices rising 3x the CPI. Ave. deductibles up 3X, to $1,655 (82% plans now with v. 50% 10yrs ago). ACA out of pocket expenses raised to $16,400 for families. Only 10m insured. 40m not

Nov 10

says US Economy “greatest in history of world”. Here’s ‘for whom’: Fortune 500 corps distributed $2T in stock buybacks+dividends to shareholders 2017-18; another $1.3T due 2019 + more buybacks-dividends payouts by remaining 2m US corps + $300b tax cuts to corps & investors

Nov 9

says US economy today “greatest in history of world”. But for whom? New Financial Times/Petersen Institute poll shows 65% say ‘no better off or worse off’ since Trump. But investors will get $1.3 trillion in stock buybacks+dividends this year, after $1.2T last year.

Nov 8

China officials today say Trump agrees to reduce tariffs. Trump says he hasn’t (while admin. spokespersons say he has). What’s up? Prediction: Trump will retract some Dec. 15 tariffs he hasn’t even yet imposed. Will it be enough for China to sign Phase 1? Maybe not

Nov 6

US data today show productivity 3rd quarter negative–1st time in 4yrs–due to prior 2 quarters of contracting bus. investment & manuf. Unit labor costs (ULCs) in turn now rising. Coming next? Less hiring & slower job growth as business moves to offset rising ULCs.

Nov 6

Anonymous Trump admin. official says signing Phase 1 mini-trade deal with China not likely in November. Maybe December. Why the delay? Dispute whether US will withdraw some tariffs–a ‘must have’ per China. Market lemmings now assuming a ‘done deal’ may be surprised.

Nov 5

Just released Financial Times/Peterson Foundation voter poll: 31% say worse off compared to before Trump; another 33% say no change. Causes: low wage & no income change + high debts. So much for distorted news re. wage growth & “Greatest Economy in US History” (Trump)

Nov 3

US treasury (UST) announces looser rules for corp. ‘inversions’-i.e. where US multinational corps (MNC) move their HQs offshore to book lower taxes. Result: less net US tax revenues, more US deficit & debt, but more MNC profits after $2T 2018-28 from Trump 2018 tax cuts

The debate among marxist economists has intensified once again. On the one side is the German economist, a marxist, Michael Heinrich. Once again Heinrich has raised questions about Marx’s notes in Vol. II, III of Capital assigning primary causation of capitalist crises to the variable of the falling rate of profit. Long an adherent to explaining the evolution and business cycle contractions to the falling rate of profit, Michael Roberts takes on Heinrich’s more ‘open view’ of Marx.

From time to time I have debated as well with Roberts, taking a position similar to Heinrich’s and urging Marxist economists to get off of Marx’s falling rate of profit theory as the primary explanation of crises and cycles. The reasons are Marx’s definition, similar to classical economics in general, is too narrow. More important, contemporary definitions and data collection of profit globally result in data on profit used to determine the rate of profit which are grossly different from Marx’s concept of profit. Furthermore, the profit data available are deeply corrupted for various reasons and therefore unreliable.

The following are some of my comments offered to both Heinrich and Roberts on the ‘Taking Sides’ blog in their debate:

“I have long disagreed publicly with Michael Roberts’ view on the rate of profit thesis. There is just no way to determine actual profits–levels or therefore rates. This is for various reasons. Here’s just a few: first, at the core of global capitalism is the multinational corporation. Numerous studies show that their profits are at least a third determined by financial asset investments, what’s called ‘portfolio’ investment. The MNCs have become, and are increasingly becoming, financial institutions. Marx’s theory of profit defines profit in production as the result of exploitation of productive labor only (or some labor necessary to the distribution and commerce of productive labor). In other words, only labor that produces discrete goods. It’s a narrow, classical economics definition going back to Smith and others. But global MNCs not only create profit from the production of goods (and not all of them either). They create profit from financial asset investment and speculation. That means if one were to keep to the definition of Marx on profit, that one would have to somehow subtract out portfolio investing profit from total profit. This would have to be done for all MNCs that do portfolio investing, in order to get some kind of average profit minus portfolio profits. Michael Roberts and other largely anglo-american Marxists don’t do this. Because they can’t. There is no data retrieving formula for this, or even access to MNC balance sheets to determine this.

Roberts and others rely on government provided data on profit that doesn’t distinguish between the aggregation of real productive profit and financial speculative profits. So his profit rate data is corrupted and cannot be used to determine the falling rate of profit.

There’s a further problem: To get even total profit data, it is necessary to adjust for accounting rules that differ country to country, that influence the level and therefore the rate of change of profit. There’s also the problem that in many countries the economic data is insufficient and distorted by collection processes. Definitions of profit are also different. This corrupts the profit data when trying to aggregate it across countries and economies.

Apart from all these data definition and collection issues that make determination of the real profit rate difficult, there’s the problem of taxation that render after tax profits as the variable even more problematic. For example, in the US alone, in 2018 Fortune 500 profits rose about 27%. But 22% of that 27% was attributed to Trump’s corporate tax windfall alone. This goes on at the US state level as well. And it differs in Europe and elsewhere as capitalist states ‘race to the bottom’ in granting tax cuts to business and investors. So forget after tax profit data altogether.

In short, data on profits are grossly unreliable for accuracy, and this is especially so globally and for multinational corporations, that typically adjust their internal pricing arbitrarily to lower or raise profits in different subsidiaries producing semi-finished goods between the subsidiaries. Roberts has no access to this internal pricing data manipulation, that makes profits artificially appear higher in one subsidiary and lower in the other. How much should nominal profits then be adjusted for real profits when the internal pricing effect is unknown and clearly would differ greatly across different corporations? Roberts doesn’t know because the data is proprietary and internal to the MNCs.

I agree with many of the critiques of Heinrich, as well as the view that Marx was not completely sure of the falling rate of profit tendency as a predictor of business cycle contractions. If he had been sure, he would not have left it just as unpublished notes.

Then there’s the related critique that even if he had been convinced, it is clear that Marx was not talking about short term business cycle contractions (which include recessions, great recessions and even depressions). Marx’s theory applies to the long run crisis and breakdown of capitalism. This is a focus very typical of classical economics, which lacked the detailed empirical data to develop a theory of business cycle contractions. Nevertheless, Roberts and friends try to ‘fit’ this long term crisis theory into an explanation of short term contractions when they argue the rate of profit determines the outcome of crises like 2008-09 or depressions.

Marxists should get off the fixation on rate of profit as the key determinative variable. Marx’s economics is about the accumulation of capital, a deeper and broader concept than profit rates. A Marxist theory of investment (aka capital accumulation) in the 21st century, which accounts for both destabilizing financial portfolio investment as well as real asset investment, is what the focus of analysis of capital in the 21sts century should be.

But Roberts & friends say wait a minute, it’s profits that determine capitalist investment and capital accumulation, so profits and profit rate are really the key. But here again, what might have been true of 1850s British economy is not the case in 21st century global capitalism. Numerous studies show that profits are responsible for less than one-third of business investment. Real asset investment is determined far more by what’s called equity and debt–i.e. business raising funding through stock issuing and corporate bonds and, increasingly now, by other financial instrument creation (now including Bitcoin and other digital currencies). So it’s not profits that drive investment; it’s financial asset creation. But Marxists like Roberts disregard this characteristic of 21st century capital and ignore it simply as irrelevant ‘fictitious’ capital. They don’t understand the nature of contemporary finance capital.

The fixation of mechanical Marxists on the rate of profit and the constant reference to Marx’s notes as proof this is the key variable is more an exercise in philology than it is an analysis of the character of contemporary capitalism.


The Wall St. Journal page one article of November 18, 2019 broadcast: “Europe’s New Jobs Stoke Discontent”.

It asked: ‘why are workers so angry’, when millions more jobs have been created since Europe’s last recessions (2008-09 and 2011-13), when millions more job openings remain, and when minimum wages have been raised in most countries’?

The article then goes on to try to answer some of these questions. It suggested one problem is that the vast majority of new jobs created in Europe have been contingent (i.e. temp, part time, independent contractor, etc.). That has meant, in turn, lower aggregate pay and a lack of insurance, disability, pension (deferred wage) benefits. It also has meant less job security and longer total hours worked and more costs to workers trying to cobble together multiple part time jobs. Europe has developed a two tier labor force, of those that ‘have somewhat’ and those who ‘definitely have not’.

These 2nd tier conditions afflict mostly younger, under 35 years old workers. Apart from the substandard wages and benefits, the contingent work has left them with a sense of hopelessness that they’ll ever be able to get out of the ‘2nd tier worker’ hole, a kind of 21st century indentureship, that they know prevents them from living a normal life, having a family, obtaining reasonable housing, and so on.

The condition is not picked up by mainstream media referring to economy-wide gains in ‘average wages’, which mostly apply to regular, 1st tier workers. Job creation numbers also do not distinguish between the two tiers and the low quality (contingent, precarious) jobs that account for the vast majority of jobs created in recent years in Europe (as well as in the USA and Japan). Nor are contingent jobs reflected in the large number of unfilled job openings, which are for the highly skilled, technical workers that capitalism needs in greater numbers today but which the educational systems have failed to produce. In short, the data that mainstream media articles like the Wall St. Journal keep referencing as indications of a strong labor force and good job gains are irrelevant to the growing problem of temp and part time jobs that official government data either ignore or don’t accurately reflect.

Furthermore, the official mainstream press and media don’t connect the mass protests and demonstrations breaking out worldwide to the growing problem of contingent employment and its discontent. Beneath the apparent causes of the growing mass demonstrations and protests lies the mass discontent and growing hopeless of young people over their deteriorating work and living conditions.
Look beneath what’s happening with Yellow Vests in France, Hong Kong demonstrations, mass demonstrations across the South American continent, in North Africa and the Middle East, and what you will find is young workers growing desperate over their working conditions, over income inequality, the lack of jobs that provide a basic living, and their sense of hopelessness of change any time soon. In other words, discontent over their fate in emerging 21st century capitalism.

But the worse is still yet to come. Contingent, or so-called precarious, work and its condemning of workers to a ‘new indentureship’—a kind of 21st century capitalist serfdom—is now being intensified by new capitalist business models and technological change.

The new models are creating even more precarious work. They are what I call the ‘Amazon Effect’ and the ‘Uber Effect’. But these new business models are not the worst of it. Overlaid on contingency, precarious work, and the intensification by these new business models is the even greater negative impact now just emerging due to Artificial Intelligence. AI promises to exacerbate the problems of low pay, long hours, job insecurity and general hopelessness caused by precarious work, and the revolutions in capitalist business models from Amazon and Uber that are making that precarious employment even worse.

Europe’s economy has been even more devastated than America’s by the recent contingent-precarious job trends of capitalism. And AI will prove even more destructive when it comes.

This past spring 2019, this writer was interviewed for a book of interviews to be published soon in Poland. The following excerpt from the interview addresses the destruction of labor markets, jobs, incomes and lives of workers, going on in recent decades and coming in Europe in the decade ahead. Already reeling under the effects of precarious work and new business models, Europe’s workers are about to be further impacted by Artificial Intelligence. AI will come later in Europe than in the US and Asia. Its introduction will therefore be more intense and its effects therefore even more disruptive.


I was talking with Aleksandr Dugin, he is one of the top ideologists for Kremlin right now and he told me something quite interesting. He said that, the problem in Europe is not so economical problem, there is a deeper problem. He said that firstly, the whole population of Europe will be replaced by people from Africa and Middle East, and all these people will be replaced by robots, the whole labor will be replaced by automation, what do you think about that.


Yes, well I don’t agree that you’re going to have a mass immigration into Europe. Europe is already closing off its’ borders in various ways from the immigration from North Africa and the Middle East. The problems in North Africa are part of the problems of global lack of real global economic recovery and the greater ease of transportation and communication of recent decades, so these folks are coming to Europe but that’s a symptom of the bigger problem. Not the problem itself.

The second part of your point is much more fundamental and structural, and that is what we are seeing now is changes in the labor markets and product markets globally and capitalist economies changing at a very rapid rate. What that means is that in order for capitalists to compete with each other globally and individually they have got to cut costs even more rapidly and the new technologies and business models are enabling it to do just that. Artificial intelligence is the next wave of massive change in the labour markets.

We’ve already seen the change in Europe where we’ve already had a shift to contingent employment, part time and temp jobs, in recent decades. Over the last ten years, most of the jobs created in Europe have been these second tier kind of jobs, part time, temp contingent jobs. Low paid, service jobs with no rights, less benefits than first tier. That labor market change is behind a lot of the yellow vests and protest in Europe. It’s economic, it’s jobs, hopeless jobs and hopeless futures and the elite’s ignoring that as it erupts. That’s already a big problem in Europe, where even in Germany 60% to 70% of the jobs created, according to data I’ve seen, have been these second-tier jobs and these second-tier workers are rebelling now.

Their unions are tied into the state apparatus, pretty much, so workers just expressing this individually, spontaneously. So that problem of widespread 2nd tier employment already exists in Europe, but now we’re going to have overlaid on it this new wave of technology, driven by A.I. that will make it much worse. And what is Artificial Intelligence? It’s simply eliminating decision making, simple decision making in the economy. More sophisticated decision making, more complex will still be there. In fact you’ll see an increase in jobs in data science and statistical analysis and so forth but these are high level and highly skilled jobs and not everyone can do them. And the education system has not been preparing people to do those jobs. So we’re going to see the jobs that were simple decisions jobs, a lot of these second tier contingent jobs, are even going to disappear.

A McKinsey report in the United States, McKinsey Consultants, recently came out this year and said in the U.S alone AI will mean 30% of the occupations will either be eliminated or significantly reduced in terms of hours worked. 30% of occupations, that’s roughly of one third of 165 million jobs in the US, are going to be either eliminated or reduced in hours and therefore pay. The same thing’s going to happen in Europe. This is artificial intelligence, which is simply large databases, massive computing power and statistical analysis to develop machine learning so that the machinery, the automation, makes the decisions and you don’t need simple people making simple decisions. Well that’s going to have a massive impact by the middle of the next decade to the economies. It’s going to allow business that make this shift—those who don’t will go under—to be more profitable and to survive the new capitalist competition that will continue to intensify. But it’s going to wipe out a lot of businesses and a lot of jobs in the process. Now all that AI effect is coming on top of the crisis of slow economic growth since 2009 that already exists as well as the economic recession that’s just around the corner. How will they deal with that, how will the elites of these countries in Europe, and the U.S and Japan, deal with this convergence of AI, slow growth, and recession is going to be interesting because we are going to have far more people unemployed and under-employed and we’re going to be in a situation of very low growth in general with segments, pockets, of explosive economic growth by those companies and industries that are able to exploit these changes in technology. It will be a very ‘dual track’ world economy, with the gap between haves and have nots growing even more than today.


I’m still wondering what will happen with this working class in Europe, and basically everywhere, who cannot compete with Artificial intelligence. Young people are going to study something, but they know they cannot compete in one decade or two decades, they won’t be able to get any job in the market because the Artificial Intelligence can just replace you. So, I was talking with people who are involved deeply with artificial intelligence, they are building artificial intelligence at MIT or wherever and they just told me “OK, maybe the government will send you some money every month and that will fix the problem” but this from my perspective sounds like bullshit to be honest.


Well you know, there will be more chronic unemployment and especially underemployment. We will have a larger based of unemployed in relationship to the employed. There will be many more underemployed than we have now, that’s going to get even worse. The question is how that affects the consumption potential of the system when we don’t have job growth. We already see a chronic slow economic growth since 2010. It will mean there will be more debt-financed consumption. They will allow more people to survive more on borrowing, more on credit. Which is just a way of taking away your future wages, but they’ll rely on debt much more. More underemployed, more unemployed, and more credit and household debt. Some people are talking that a universal basic income will have to occur.

I think that might be a partial solution in theory but it will never fly politically, at least not in the USA. The political forces will never agree to UBI, universal basic income, as long as they have control of the political system to the extent they do. So I don’t see that actually happening over the next decade. Not in the USA. I think the recession is coming soon and it will accelerate AI. You know the McKinsey study predicted that by 2025 you’re going to have maybe thirty to fifty percent of all the companies implementing some form of AI. And again, A.I.is just a new business model to reduce cost even more. That’s what it’s all about. AI is very much like Amazon and it’s very much like the sharing economy. See this is the new product revolution in capitalism.

Capitalism is evolving and changing more rapidly than ever before. It’s always been a dynamic system. But It’s accelerating in its rate of change and we see this is in the labor markets and we see this in the product markets and these new business models now emerging. And we see it in changes in fiscal and monetary policy and we’re seeing it in trade policy. What is Trump’s trade offensive all about? Well it’s about positioning the U.S capitalist class, and U.S business elite, to maintain hegemony over the global economy as all these changes occur over the next decade. They are restructuring particularly the relationship with China, the biggest US competitor, so the U.S business elite can remain dominant and the dollar, the global trading currency, can remain dominant. They are preparing for this and that’s how I see all this Trump trade war.

Trade is a response to capitalist restructuring underway. Changes in trade relations have to occur after we have had all these structural changes in the finance markets, product markets and the labor markets. Capitalism is changing.

Capitalist change means that if you’re not a capitalist, you’re going to make even less, they’re going to squeeze you with these new business models, you the worker, and they’re going to squeeze their capitalist competitors to whatever extent they can with these new business models. If you look at France, what are all the changes Macron is trying to do? Well he wants to change the product market, he wants France to become more like the U.S in terms of Uber, Amazon and A.I. and that’s true for all of Europe.

They are all trying to do this. Germany is still based on the old business model largely, i.e. to make things, but it knows it’s going to have to change more rapidly in the future. Europe knows this, they know they’ve got to make these changes and they know they are behind the global curve.

They’re playing catch up to the USA and China. The changes are coming rapidly in China and in the U.S. Britain wants to attach itself more to the U.S, that’s partly why you have this Brexit thing. It knows what the future is going to be, France knows, but they can’t make the change fast enough you see because they don’t have the banking system, the financial system, to pull off the financial restructuring. They don’t have the higher education system to prepare the labor markets for AI and the new models, and to be able to do this on the massive scale necessary, that’s already occurring in the U.S and China.

So Europe is the weak link, as I said, because it’s not been able to make this capitalist evolution fast enough in product markets, and its attempts to radically change labour markets in favor of capitalists is producing blowback and discontent and creating working class eruptions both in the streets, like in France, and at the ballot box, like in Brexit in England and other places, in Italy.


Well it sounds like some dystopian movie from the future, so what do you think is inclusive capitalism is some kind of solution for this? For example, like Lynn Forester de Rothschild she’s proposing inclusive capitalism as a solution for economy right now, so what do you think about that, is it a real solution or some kind of hoax?


Well I think that’s an ideological phrase, we’re all inclusive in capitalism, we’re all a part of capitalism. If she thinks that the solution is to make everyone a capitalist, that’s nonsense. That kind of ideology has always been around in one form or another, in other words. It’s a way of deflecting the problem of capitalism itself by saying we’re going to reform capitalism and you can all be capitalists. In other words you’re all going to make more money. It’s an ideological response to a crisis of the system itself in my view. You know, it’s a phrase, sounds nice: inclusive. You don’t have to be a worker and worry about whether you’ve got a job or you can feed your family, you can be a capitalist too. How that actually works, I don’t know. It’s more a way of deflecting discontent than any realistic solution


What do you think is the real solution here, because people are proposing the sharing of the economy which is new.


Yeah, the sharing economy, or the gig-economy, whatever you want to call it, this is one of the new business models at the leading edge of capitalism. Whether or you talk about Uber or Airbnb or all the other “sharing”. What is the essence of the sharing economy? Well it’s a way of capitalist businesses to figure out how to pass their cost of production off to the work themselves. Let’s take Uber. It’s model makes them more profitable than other businesses models. With the changes of technology, we’re getting new business models. Uber is an example of a new business model of the gig-economy. Amazon is an example of a new kind of business model as well.

Artificial intelligence, and the businesses and industries they will spin off, are the ‘next generation’ of the shift to new capitalist business models. The old industrial business model where you make things, make goods, where you have a chain of suppliers and you hire workers to make the things… that is dying. It is not dead by any means, but the leading edge of capitalist evolution are the new business models. Take the Uber business model. Think about it right, Uber has software and Uber has control of the customer, but instead of Uber building a physical infrastructure or investing in physical capital, i.e. the transport equipment, it gets their worker to use his physical capital, his car and to use his working capital meaning paying for insurance and gasoline and so forth. So they are making the worker bear the cost of the physical and working capital, which reduces the money wage Uber pays the worker. It’s a form of intensifying exploitation. Uber sits back, and it controls the cost, it has no cost of goods. It’s a service that doesn’t have to produce anything physical. It doesn’t have to pay the worker a higher union wage, in fact the laws prevent the workers from organising as workers because they’re supposedly small businesses themselves you see. It’s a new form of more intense exploitation of the working class, that result in greater profits for Uber. Why do you think Uber is able to raise billions of dollars? Because investors know the business model is so profitable. And this is what all the sharing economy is about, whether it’s Airbnb or whatever. In Airbnb, you get the homeowner to use his own physical capital, his home, as the hotel. The sharing economy company has the software that identifies the customers and puts the customer in connection with the ‘worker’, whether he is the car-driver or the homeowner, and reaps super profits off the top. You see it’s a much more efficient, much more profitable business model and that’s why it’s booming.

We’re going to see the same thing happen with Amazon where you’ve got a new business model as well. Where you don’t have brick and mortar and no worries of the cost of facilities and so forth. You just have transport and moving goods around, that’s another new business model that’s already wiping out other big box retail stores and small retailers everywhere in the cities it does business. It will soon destroy millions of trucking jobs as well and automate out its warehouse jobs. That’s a new business model. Then we’re going to see newer business models with AI, because it’s all software manipulation and eliminating the cost of production, the cost of goods, and putting that cost on the backs of workers, who are hired as small businesspeople. That’s the AI model.


Exactly, so it is in other terms the person who is involved in that kind of sharing economy is in some way a capitalist.


Yeah, In other words you make the worker assume the worst part of being a capitalist, in other words, the costs. You don’t let the worker, who becomes a kind of blended worker, part worker/part small businessperson, share in the profits. It’s the company sitting on top of it all, the Uber, the Airbnb, whatever that skims off the lion’s share of the profits, and you don’t even allow the new worker businessperson to organize collectively amongst themselves to negotiate a share of the super profits for themselves. You use the laws to prevent that. Maybe that’s what this other person meant by inclusive capitalism. The worker becomes a businessperson in the view of the law, and his exploitation is intensified in the process. You know it’s simply a justification for the intense exploitation these new business models represent.


So what is the solution here for this sharing economy, to be shareholder of Airbnb or other platform or whatever it is, I’m not just a worker who is involved with Airbnb, I am a shareholder of this stock of this company, maybe this is the solution if you know what I mean?


Yeah, well I know what you mean but individual share holding of stock of a company doesn’t give you any control over their business practices and strategies and policies of that company. It just means you’ve given some of your money to someone else to invest somewhere. You need to have sufficient control of the stock, 5 or 10 percent to affect the business policies of the company. So just owning stock, if you’re a small stockholder, doesn’t provide any control, it’s control that we should be talking about not ownership of a piece of paper and a formal, infinitesimal share of a company.

What needs to happen is that the laws need to change so that the worker-employee/small businessperson, whatever this new blend of worker is in the labour market, can organize collectively to get a collective voice to defend themselves. That hasn’t happened yet, and you’re not going to stop this new business model of capitalism, but the question is how vulnerable do you leave those whose are being exploited by it. I really think they need to unionize in a new form of union. Not the old form of union based on the old company structures, but some kind of new form. But the capitalist states are making sure that they block that by legal means. And as far as the rest of society is concerned, what we got in the 21st century here is the state, and the government, engaging increasingly in subsidizing business and capital incomes. Both with monetary and fiscal policy. With monetary policy they’ve bailed out the banks and investors, then they’ve given them free money for ten years now. Everywhere in the advanced economies, and especially in Japan, and to some extent in Europe, they’re propping up bond and stock markets by central banks buying private securities. That increases the demand for bonds and stocks that keeps up the price of both that protects the wealth of investors.

Financial assets like stocks and bonds keep rising, but it’s all artificial. They’re being subsiding more and more by the state. Fiscal policy in the form of tax cuts for corporations, investors, and the rich more and more. In the U.S in 2018 they’ve passed four trillion dollars in tax cuts for businesses and investors. So the state, fiscal and monetary policy and other forms of policy, like trade policy, are being employed by states to subsidize capital incomes like never before. we now see a trade war with Trump who is trying to restructure the global trading system for that purpose. The state is increasing propping up the capitalist economy and capital incomes.

Before, state policies would share with labor, and small businesses, but now you’ve got capital, big capital, particularly finance capital which has absorbed more and more political control, and thus we see fiscal monetary policies more and more reflecting the interest of corporations, professional investors, and the wealthy at the expense of the rest, until you get an eruption like the yellow vests in France. There the government had to back off a little, Macron backed off a little, threw a few crumbs to pacify it. Teresa May backs off a little bit, reduces austerity just a little, and throws a few crumbs, to the working classes of Britain. These responses are temporary responses, however, to relieve the pressure while the main policies continue to subsidize with monetary and fiscal measures, i.e. subsidize the business class. How long can that go on, well history will tell.

Dr. Rasmus is author of the just published book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump‘, Clarity Press, October 2019, available for purchase at discount from this blog. Click on the book icon.

Listen to my Alternative Visions radio show continuing analysis of Neoliberalism, today, focusing on the ‘balance sheet’ of Trump’s effort to restore US Neoliberalism in a more aggressive, virulent 2.0 form; where it has succeeded and where it is not doing so.

TO Listen GO TO:



In the first half hour of today’s radio show, Dr. Rasmus reviews the latest developments in the US-China mini-trade deal negotiations and provides the latest snapshot of US economic data releases on manufacturing, investment, and retail sales-consumption.

In the second half hour, Dr. Rasmus continues the analysis of Neoliberalism in crisis topic of last week, explaining how Obama failed to restore it to full effect in the wake of the 2008-09 crash and how Trump represents the attempt to restore it in a new, more virulent 2.0 form. The fundamental main policy propositions of Neoliberalism are restated and how Trump has fared to date in each area are addressed. Big success by Trump in restoration have occurred in business-investor tax cutting and increases in war-defense spending, but failure in social program spending cuts and containing escalating deficits and debt. Trump industrial policy has also been successful, with deepening of deregulation, privatization, continued wage compression, benefits cost reductions, and other areas. Neoliberal monetary policy of chronic low interest rates remains a work in progress as Trump fights the Fed over rate reduction but the Fed slowly falls in line. Neoliberal ‘External’ policy (trade, currency exchange rate, FDI money flows) represents Trump’s major failure at restoration, however, as the trade war produces little result and reduces investment and growth globally and increasingly as well in the US. (A more complete analysis is available in Dr. Rasmus’ just released book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’ available on his blog, jackrasmus.com, along with recent articles on the topic). Next week: the material forces at work undermining a restoration of Neoliberalism under Trump and his successors.

The following extended article will appear in the next issue of ‘Z’ magazine. It is a summary of the major themes and articles in chapters 1&2 of my just released book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, now available for purchase at discount from the book icon on this blog page, via Paypal, and from the icon on the front web page of Dr. Rasmus’s website, http://kyklosproductions.com.

“Hundreds of books and articles, perhaps thousands, have been written to date on the meaning and consequences of what’s called Neoliberalism. But clarity as to what it means, what has driven its evolution for the past four decades, and what’s its likely future trajectory remain insufficient at best.

Critics of Neoliberalism have yet to explain it fully or adequately. They are therefore unable to say little about its future evolution.

Some key questions that remain unanswered are: Has Neoliberalism been unraveling since the 2008-09 recent economic crisis and the slow growth, often stagnant recovery that followed? Is it being restored under Trump? Will it survive the next capitalist crisis almost certain to occur by the early 2020s? What are the material forces maturing within 21st century capitalist economy that will precipitate and drive that next crisis, and will Neoliberalism be able to successfully adapt? If not, what ideas and policies might replace the current Neoliberal era (1979-2019) of capitalism?

Most analyses concur that Neoliberalism represents an economic shift introduced by capitalists and their political elites—initially in the US and UK—in response to the crisis capitalism encountered in the 1970s decade. In other words, it has something to do with capitalist economy in crisis.

Other accounts attempt to explain its origins and evolution primarily from the perspective of an Idea that inspired, defined, and enabled US and UK capitalist-elites’ to respond successfully to the 1970s crisis.

Still others explain Neoliberalism as an historical practice, i.e. as a new regime of policies introduced in the late 1970s in the US and UK—later adopted by other capitalist economies worldwide to varying degree and form—-that emphasizes austerity in government spending and reliance in policy matters on free markets.
But all that doesn’t really tell us much. Defined that way leaves its meaning still opaque and ambiguous-—and therefore able to predict where and how Neoliberalism may evolve in the future.

The analysis of Neoliberalism to date has produced so many interpretations, often contradictory, that readers remain confused as to what exactly it means. Is it about introducing free market principles into economic and social policy? Is it about austerity in fiscal spending? Is it just a substitute term for what was formerly referred to as Imperialism abroad and class exploitation at home? As one analysis concluded, “imprecision would seem to characterize its use, sometimes even among those for whom the concept is central to their analysis, and its over-use is seen to have resulted in a loss of analytical value.”

The Ideology of Neoliberalism

According to those approaching Neoliberalism from the perspective of the evolution of an Idea, the Neoliberal Idea originates around mid-20th century among ultra conservative intellectuals like Friedrich Hayek and Milton Friedman in economics; in the philosophy of radical individualism by Karl Popper and Robert Nozick; and later in policy proposals from right wing pundits like Charles Krauthammer, William Kristol and Robert Kagan—to name but a few or the more notable.

As these intellectual originators viewed it, their task was to adapt, repackage and resell some of the main tenets of classical liberalism. To plant and nurture the seeds of new ideas, and counterpose those ideas to the prevailing dominant Keynesian economic and social compact views that prevailed after world war II. The new ideas would be resurrected classic Liberal ideas adapted to the post-war environment. New ideas that were new-Liberal or Neoliberal, designed to displace the dominant Keynesian-social compact ideas of the period and encourage and usher in a new set of policies based on the new ideas that would, in effect, represent a return pre-Keynesian, pre-social compact ideas once again, now adapted to the post-war reality. It was to be old classic Liberal wine in the new Neoliberal bottle.

But is Neoliberalism actually ‘Liberal’? How does it compare with the classic liberal economic and social theory ideas of the 17th-18th century? Neoliberalism as an Idea claims it is based on classic liberal ideas of free markets and individual freedom. It claims that by adapting classic liberal principles and propositions to new economic and social policies the new policies will succeed in promoting economic growth and stability, whereas the old Keynesian-collectivist policies failed to do so. Thus it is Neoliberal Ideas that drove the eventual policies that came to be known as ‘Reaganomics’ in the US and ‘Thatcherism’ in the UK in the late 1970s early 1980s.

But Neoliberal Ideas have actually little in common with the classical Liberal; and it is an intellectual conceit to argue that Neoliberal Ideas drove and determined the Neoliberal policies that were eventually introduced in the late 1970s-early 1980s. In fact, a reasonable argument may be made to the contrary: it is Neoliberalism in Practice that reached back and adopted Neoliberal Ideas and propositions in order to justify and legitimize Neoliberal policies.

What then exactly are the basic propositions of the Idea of Neoliberalism? What congruence is there between those propositions and 17th-18th century Classic Liberalism? And do either—i.e. Classic Liberal and Neoliberal Ideas—have anything to do with Neoliberalism in Practice?

The Basic Propositions of Neoliberalism as Idea:

• Markets should always be free of government interference and the economy and policies should be based on free markets
• Free markets require deregulation of business, as well as privatization of all public ownership of production of goods or services
• Free markets are always and everywhere more ‘efficient’ than regulated markets or government provided goods and services
• Free trade should always and everywhere govern the exchange of goods and services between economies and countries
• Government should never intervene in markets—whether to provide public works, correct negative ‘externalities’ created by those markets, or even to provide public education, health care, or other services
• Taxes should be cut to stimulate economic growth—especially taxes on business and investors. Cutting taxes creates additional investment and therefore employment and growth
• Government budgets should always be ‘balanced’, avoiding deficits and therefore accumulation of government debt
• To ensure stable economic growth, the money supply should be increased according to a ‘monetary growth rule’—i.e. a set amount every year.

But these elements of the Neoliberal Idea have very little to do with Classic Liberalism. And have even less to do with Neoliberalism in actual historical practice.

The Basic Ideas of Classic Liberalism:

• Markets should be free only to the extent that they fostered superior moral behavior and enable the development of the individual.
• Free markets were more efficient only if they promoted competition among capitalists, resulting in goods being produced at the lowest cost, and therefore lowest price, while providing the greatest possible amount of goods to the greatest number of individuals.
• Not all business activity should be deregulated or privatized. Some things markets would not produce, even if socially necessary and demanded by the public; or they would produce them for only a wealthy minority who might afford them only at the much high prices that markets might have to charge a smaller, privileged number of buyers.
• Markets sometime behave badly and at times must be regulated. Not all government services should be privatized. In fact, services like public education must be provided by government since markets would not find it profitable to provide them.
• Free trade is not always appropriate everywhere. Nor beneficial to all.
• Economic growth is stimulated by raising taxes on business, not cutting taxes. Higher taxes force business to introduce more efficient ways of producing to offset the cost of the tax increase. New technology that results actually increase jobs and stimulate economic growth.
• Budget deficits are justified for purposes of spending on defense, public safety, and critical social services (education) and public works that markets may not provide
• Money is ‘neutral’. An increase in its supply cannot, by itself, lead to economic growth and stability. Growth is generated only by increasing available land, labor, and capital and by raising its productiveness.

A close reading of the actual works of 17th-18th century Classic Liberal economists like Adam Smith, David Hume, and others shows the preceding points represent the fundamental propositions of Classic Liberalism. But, as a comparative reading clearly shows, they are in sharp contrast to the basic propositions that define Neoliberalism that emerged in the late 1970s and evolved after.

In short, in so far as classic liberalism is concerned, Neoliberalism is not ‘Liberal’ at all. Neoliberalism is not ‘new’ Liberalism or any kind of Liberalism. What it represents is something quite the contrary.

Comparing Neoliberalism as Idea with Neoliberalism in Practice

What about Neoliberalism in actual, historic practice? How does it compare—to Classic Liberalism as well as Neoliberalism as Idea? Neoliberalism in Practice differs from both. It is even further removed from Classic Liberalism. And in a number of ways it is even the opposite of Neoliberalism as Idea.

First, Neoliberalism in practice is not at all about expanding free markets. There are few, if any, free markets under Neoliberal capitalism. The fiction is created by Neoliberalism as Idea writers is that, just because industry is deregulated and public goods privatized, deregulation is equivalent to the creation of ‘free markets’. Neoliberal capitalism is about the destruction of market competition and the concentration of economic power among fewer and fewer remaining businesses in an industry. It is about eliminating ‘free markets’ whenever and wherever possible. Capitalism always drives toward eliminating competition, and without competition there are no ‘free’ markets in the Liberal sense. So Neoliberalism in Practice is the antithesis of free markets.

Secondly, it is different in that, in historical practice, Governments in the Neoliberal era of capitalism are deeply and increasingly involved in the economy on behalf of capitalist interests in general, in subsidizing capital in increasing ways, in redistributing income to capital from other classes, and in assisting mergers and acquisitions and thus advancing the concentration of capital and business into fewer producers and sellers. And the larger and the fewer the remaining producers, the less ‘efficient’ they become. That is, the higher the costs of their production become and in turn the higher the prices they charge consumers. Markets in effect become more concentrated, less efficient, and less ‘free’ as a consequence of Neoliberalism in Practice.

One might add to this view of Neoliberalism’s contribution to ‘micro’ level inefficiency an even more massive macro inefficiency that results from Neoliberalism: How efficient is Neoliberal capitalism when it creates economic crashes like 2008-09, when 14 million homeowners in the US alone were foreclosed and lost their homes? When 20 million were left unemployed, and thereafter underemployed for years after 2009. Or when $4T in lost interest income occurred for retirees as a result of the near zero interest rate policy of the central bank, the Federal Reserve, that remained in effect from 2009 to 2016? Or what about the macro efficiency of the additional $4T in collapsed retirement pension benefits values that happened during the crash and aftermath? Meanwhile, while all this inefficiency was occurring, the same central bank Neoliberal zero rate policies resulted, in more than a $1T a year on average in stock buybacks and dividend payouts distributed to shareholders every year from 2010 through 2019. Neoliberal monetary policy meant Corporations borrowed virtually ‘free’ money at near zero interest rates—-either from loans or by issuing corporate bonds—-and turned around and distributed most of it to shareholders at the rate of $1T plus a year. And what of the macro-inefficiency of spending $7 trillion in US wars and products that were either blown up or dumped in deserts when declared obsolete. The ‘macro-inefficiencies’ of Neoliberal capitalism are massive and almost incalculable, in the US economy alone.

In short, there is nothing ‘free’ or ‘efficient’ about markets in the Neoliberal era in practice. Quite to the contrary of the ideological propositions falsely identified with Neoliberalism as Idea. The founding and later defending intellectuals of Neoliberalism, when promoting that notion as free and efficient markets, are therefore simply peddling a lie—-i.e. they are promoting the ideology of Neoliberalism not its reality. They are peddling a notion of Neoliberalism that doesn’t exist in the real world of Neoliberal practice. What Neoliberalism in Practice has done is simply used the lie that free markets are more efficient in order to justify and to ‘sell’ the actual policies of industry deregulation and public goods privatizations and related false notions. In other words, deregulation, privatization, etc., have nothing to do with free and efficient markets. The latter are just the intellectual veil, the cover to justify the Neoliberal policy, the true aim of which is to reduce business costs and open up new public markets for profitable exploitation.

Fourth, the Neoliberal idea that tax cuts create jobs and economic growth is no more accurate in fact than privatization, deregulation, free-efficient markets result in more economic growth that benefits all. Tax cutting under in the Neoliberal era since 2000 alone has amounted to more than $15 trillion—80% of which has accrued to investors, businesses, and the wealthiest households. In turn, that $15 trillion has resulted in the weakest rate of investment, job creation, wage increases, and general economic growth in the US in the past half century. In other words, business-investor tax cuts did not create jobs. They destroyed them, as tax incentives strongly encouraged US multinational corporations to move operations offshore. Trump’s 2018 tax cuts—the latest iteration of this ‘business tax cuts create jobs’ shell game alone provide another $2 trillion for US multinational corporations over the next decade. They can now produce offshore tax free. Why then should they expand production and jobs in the US, one might ask, when they can henceforth produce offshore and pay no taxes?

Neoliberalism as Idea further maintains that free trade should be the norm everywhere. But in Neoliberal Practice free trade means incentives to further move US production offshore. US businesses then produce offshore at lower cost and ship the goods produced back into the US, now without tariffs, for US workers to buy, now with lower paid service jobs replacing the higher paid manufacturing jobs that were offshored due to free trade. Instead of higher wages, workers are now allowed to borrow (credit) to buy the products, incurring debt, the interest of which they now pay banks and stores issuing the credit cards. Free trade also means banks and finance capitalists, who get to borrow at near zero interest rates, invest the money offshore instead of in the US. Free trade is more about such international money flows from the US as it is about goods and product flows produced abroad back to the US. All this is the reality of Neoliberal free trade, compared to the fiction of the Neoliberal Idea of free trade where all parties somehow benefit from free trade—workers, consumers, as well as capitalist producers and bankers.

But perhaps nowhere is the chasm greater between Neoliberalism as Idea and Neoliberalism in Practice than on the question of deficits and debt. The former declares Neoliberalism is about balancing the budget and reducing government debt; whereas Neoliberalism in Practice is actually about allowing the uncontrolled escalation of annual budget deficits and therefore government debt. At barely $1 trillion when Neoliberalism in Practice began in 1979-80, US budget deficits and debt had escalated to $4T by 2000, rising to $10T by 2009, and thereafter to nearly $23T by year end 2019. The main causes have been trillions in tax cuts for corporations and investors, uncontrolled wars and defense spending, and deregulation and privatization of healthcare industry that has permitted decades of price gouging. Trump’s 2018 tax cuts and his war spending escalation will raise the $22T current US national debt to more than $35T by 2028.

Finally, the monetary growth rule of Neoliberalism as Idea also contrasts sharply with the practice of Neoliberalism in monetary policy. Instead of allowing the central bank to slowly and steadily increase the supply of money in the economy according to an objective rule, or fixed formula, the practice of Neoliberalism has been to have the central bank continually inject massive amounts of money into the economy. In times of banking crises and after as well. The result is chronic, low interest rates, which enable lending at low cost to investors and corporations alike, much of which borrowed is then diverted to offshore investments, to re-investment in stock, bond and other financial markets, to distribution to shareholders in the form of stock buybacks and dividend payments, or into merger and acquisition of competitors by businesses. The Idea of Neoliberalism thus has little in common with its practice so far as money is concerned.

What the foregoing paragraphs reveal is that Neoliberalism as Idea has little in common with Classical Liberalism, and even less in common with Neoliberalism as Practice. The function of Neoliberalism as Idea is therefore to provide a false economic analysis, and pro-individual, pro-personal freedom moral arguments, designed to justify the Neoliberal policies that occur in practice—-i.e. policies that are often quite contrary to those arguments and that Idea. The practice of Neoliberalism is thus neither classical liberal nor even Neoliberal.

Contrary to many accounts of Neoliberalism–both defensive and critical alike–the Idea of Neoliberalism does not give rise to or enable Neoliberalism as actual historical practice. The role of Neoliberal Ideas is to legitimize—-after the fact—-the actual policies and practice of Neoliberalism.

A problem with many accounts and analyses of Neoliberalism is that they assume that Neoliberalism as an Idea is what gave rise from the mid-1970s on to Neoliberalism as an actual historical practice. Somehow the ideas are what convince capitalists, their lobbyists, their business organizations, their trade associations, etc. to propose to their political elites in Congress and legislatures the actual Neoliberal policies, The policies are thus a reflection of their ideas. However, as just shown, Neoliberal ideas have little in common with the actual policies and practices of Neoliberalism that get introduced and implemented. So how can the ideas drive the actual historical practice, i.e. the policies, if they are different?

More likely is that the causation is actually the reverse: the policies and practices are developed by the capitalists and their political elites. The ideas of Neoliberalism—-a strange amalgam of classic and non-classic liberal propositions—-are after the fact then employed as justifications and legitimization of those policies.

Embalmed in a veneer of personal freedom, individualism, efficiency, growth benefiting all, etc., the dead body of Liberalism is resurrected in decayed form to argue that the corpse is still alive and liberal even though it has long deceased.

Nonetheless, many critics of Neoliberalism simply slip back and forth between the Idea and the Practice of Neoliberalism, with little explanation of how the one, the Idea or the Practice, causally determines the other.

More on Neoliberalism in Practice

What then are the actual policies associated with actual, historical Neoliberalism? Here too critics of Neoliberalism fail to provide a comprehensive explanation. Major attention is given to Neoliberalism as Austerity policy, or as industry deregulation and privatization, or as free trade. But little attention is paid to Neoliberal monetary policy or Neoliberal external policies apart from freetrade—i.e. currency exchange rate policy or what is called the ‘twin deficits’ policy solution. Nor is much explanation given to how Neoliberal policy promotes the financialization of the global economy, financial deregulation, and cross border money capital flows. While fiscal policy and industrial policy (i.e. deregulation, privatization, de-unionization, wage compression, etc.) are addressed narrowly in most accounts of Neoliberalism, not much in the way of analysis and critique is given to External Policy and Monetary Policy. But Neoliberalism in Practice is more than just austerity in Fiscal Policy or deregulation-privatization in Industrial Policy.

Neoliberalism in Practice represents a particular policy regime, consisting of Fiscal policy (tax, spending, deficit-debt management), Industrial policy (deregulation, privatization, de-unionization, wage compression, financialization), Monetary policy (excess liquidity injection, chronic low interest rates), and External Policy (trade, low US dollar exchange rate, twin deficits).

Neoliberalism represents a particular mix of these policies. Before Neoliberalism, the four main policy areas also existed but in a different mix and different relationship to each other. It was a different policy ‘regime’.

US Neoliberalism as the 3rd Capitalist Restructuring

The policy regime before the Neoliberal policy shift originated in the wake of of the second world war, originating roughly in the period, 1944-53. A still different policy regime was created in the US just prior to world war one, in the period 1908-13. Thus the US experience has been to restructure the economy in a major way at least three times in the last century: 1908-13, 1944-53, and 1979-88. The latter, 3rd restructuring is simply called the Neoliberal. Its policy mix or regime differed from the two prior regimes.

The policy restructuring in all three cases was designed to change policies in order for US capitalism to confront a challenge or crisis. In 1908-13 US capitalism prepared to restructure its economy in anticipation of becoming a more or less equal competitor with the UK and European capital in general on the stage of the world economy after world war one. In 1944-53, capitalists restructured once again as the US became the sole hegemon in the global economy following world war two. Both restructurings represent US capital shifting policy fundamentally in order to confront a major crisis and opportunity. In each case the restructurings were accompanied by a particular policy reordering. That reordering occurred a third time as a response to the crisis of the 1970s, not war. In that sense it differed from the earlier two restructurings and policy shifts.
In the Neoliberal case, the US re-established itself as the hegemon in the global capitalist economy for at least several more decades. Challenges domestically and abroad in the 1970s were successfully contained, and US capital emerged once again globally and internally as the key dominant player in the global economy.

Neoliberalism in Practice—i.e. as a particular new policy mix of the four areas—continued to expand and evolve throughout the 1990s and after 2000. The global crash of 2008-09 halted its development and evolution, however. As argued in this writers’ book, ‘The Scourge of Neoliberalism’, Neoliberal policy evolution hit a wall with the 2008-09 crash. Obama tried but failed to restore it and regain its momentum. Trump’s policies should be viewed as a future attempt to restore Neoliberalism as policy, albeit in a new virulent and aggression form that is still in progress.

Whether Trump will succeed remains to be seen. However, there are fundamental real and material forces in development—involving changes in technology, AI & machine/deep learning, the nature of money, production processes and distribution channels, new business models, product-capital-labor markets, and in political resistance both domestic and foreign—that may well prevent Trump’s restoration attempt.

The Main Policy Propositions of US Neoliberalism in Practice

Over the past four decades Neoliberal policy has evolved and expanded. It has also begun to develop its own internal contradictions—as discussed in more detail in the aforementioned book. As a partial summary of Neoliberalism in Practice at this point, the following elements may be said to now constitute Neoliberalism in Practice as of 2019:

• Social program policy cuts, focused heavily on reducing and eliminating government programs introduced from 1934 through 1965;
• Aggressive deregulation of industries, especially banking & finance, communications, public and private transport, education and healthcare;
• Privatization of employer contributed healthcare and retirement services introduced with the 2nd restructuring, privatization of military services, and privatization of public goods and services including federal lands access;
• Deep reduction of business-investor-wealthy household taxation on profits and capital incomes (interest, dividends, business rent, etc.);
• Chronic escalation of war and defense spending amidst social spending austerity;
• Tolerance of rising budget deficits, the national debt, and interest on that debt;
• Central bank monetary policies based on chronic liquidity injections designed to ensure long term low bank interest rates that subsidize business costs of investment;
• Incremental de-unionization and weakening of collective bargaining, as well as compression of wage incomes;
• Promotion by government of radical changes in the labor markets, creating millions of contingent labor employment, low paid service jobs, atrophy of minimum wages, massive offshoring of manufacturing employment, and encouragement of on-shoring of skilled labor visa policies;
• Substituting free trade for traditional trade policy measures based on tariffs, quotas, and administrative measures as the primary means to maximize US corporate exports;
• Acceptance of US trade deficits in exchange for a ‘twin deficits’ solution ensuring US offshore dollar recycling arrangements with major allies and global trading partners;
• Encouraging a long term low US dollar exchange rate and US money capital outflows and foreign direct investment;
• Promotion of financialization of the US economy at the direct expense of real asset investment based economic growth;

Thus Neoliberalism in Practice is not simply a set of policies associated with social program cutbacks and fiscal austerity, or industry deregulation or privatization, as many identify. It is much broader than that. It represents a basic economic system restructuring that involves a resurgence and aggressive expansion at the expense of both foreign capitalist competitors as well as domestic working classes. It is an attempt to re-establish US economic hegemony in the late 20th century and well into the 21st. In that it succeeded…until the crash of 2008-09, from which it is yet to fully recover.

What’s Missing in Critiques of Neoliberalism

Apart from not adequately addressing the material origins of the restructuring that gives rise to Neoliberalism, critics of Neoliberal policy fail to address key elements of its unique policy and program mix. To begin with there’s the lack of analysis of what’s called external policy—i.e. twin deficits, external debt, currency exchange rates, foreign direct investment and global money capital flows—are often largely missing. Neoliberalism is characterized by a particular set of external policies that differ from prior restructurings. Consideration of trade or goods flows, and perhaps free trade treaties, are the limited focus of most critiques. Another area where critics fall short is a superficial treatment of Industrial policy. While de-unionization, job offshoring, general wage compression, and industry deregulation are addressed by critics, fundamental developments like the rise of contingent labor and the even more destructive now just emerging phenomenon—artificial intelligence and machine learning—are ignored for their effects on labor markets and the shift in capitalist vs. worker relative power they represent. Also missing, in all but minor terms, is the financialization of the global capitalist economy. Here the role of capital markets, shadow banks, derivatives, the rise of the new global finance capital elite, and the relative shift to financial asset investing, crowding out real investment, are left largely unconsidered; in other words, that which might be classified as the new phase of imperialism and US vs. global capitalist class competition and conflict is not adequately addressed. Not least, what is also missing in most accounts of Neoliberalism is how its advance is closely correlated with the atrophying and decline of Democracy in America—i.e. the norms, practices, parties, the electoral system, and even government institutions.

Dr. Jack Rasmus
copyright October 2019

Dr. Jack Rasmus is author of the just released book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, October 2019, which is available for purchase at discount from the author’s blog, jackrasmus.com, and website, http://kyklosproductions.com. Jack hosts the weekly radio show, Alternative Visions, and tweets at @drjackrasmus.

For my continued discussion of Neoliberalism, and why it is failing, listen to my Alternative visions radio show of Nov. 8. (fast forward to the second half hour of the show for this discussion). The show’s first half comments on economic developments of the past week re. China-US differences over tariff reductions, what’s driving the US stock markets to further record levels when earnings and fundamentals forecast problems, why Europe’s sinking into recession, and why speculators are exacerbating the Repo Market problem.




In the second half hour of the show Dr. Rasmus continues the discussion of Neoliberalism, focusing on the internal contradictions inherent in its policy regime, now intensifying after the 2008-09 economic crisis. Rasmus explains the four policies of Neoliberalism—fiscal, monetary, external-trade, and industrial—and how they represent the post-1970s restructuring of the US and global capitalist economies. Earlier restructurings before world war I and following world war II are contracted to the 3rd, Neoliberal restructuring. Examples of contradictions within, and between, the four policy areas are explained: How fiscal war spending and tax cutting clashes with deficits/deb management; how monetary policy exacerbates trade and currency policies; how trade policies exacerbate industrial policy; how monetary policy contradicts both fiscal and trade policies. In the first half of the show, Rasmus provides updates and analyses on the tariff dispute between China-Trump, why US stock markets keep rising despite fundamentals, how Europe’s economy continues to stagnate, and new evidence how speculation is contributing to the instability in the US Repo market. (Next week: ‘Why Trump’s Attempt to Restore Neoliberalism 2.0 Is Failing’)