Friday, 9 December 2016
Introduction: Is the EU Integration Model Viable?
Alessandro di Battista, deputy of Italy’s Five Star Movement that helped to defeat the government’s Constitutional reform proposal in December 2016, has hinted that voters decide a possible exit from the euro-zone during the next election for prime minister. This may or may not take place, but Italy remains a possible candidate for exiting the euro. This hardly comes as a surprise after the referendum revealed a decidedly anti-EU sentiment amid the banking crisis and economic stagnation the country is suffering.
Is the EU on the eve of disintegrating, or can it survive without the United Kingdom and Italy with other countries to follow? Does it really make much difference if it dissolves, considering that countries will forge bilateral and multilateral trade, investment, environmental and other agreements? Is the current EU integration model viable for all its members or merely for Germany enjoying economic hegemony over the euro-zone?
Shortly after the deep recession that started with the subprime mortgage bubble in the US in 2008 that eventually spread around the world, the EU began to transform in significant ways. Just about everyone was so focused on the immediacy of the recession that there was no focus on the transformation of the integration model. The integration model under which the EU was founded changed to reflect the sharp division between the hegemonic core members led by Germany and France vs. the weaker periphery ones in Southern and Eastern Europe. Largely because the financial sector needed to absorb capital otherwise going to the middle classes and workers, the state became the conduit for altering the integration model by using the common currency, EU rules on GDP-to-debt ratio as a means of limiting public spending, loans and subsidies, all as leverage to enforce neoliberal policies and preserve the hard currency. The result was middle class living standards began to decline along with the prospects for upward social mobility as reflected in high youth unemployment, including college graduates, as the Organization for Economic Cooperation and Development (OECD) noted. https://data.oecd.org/unemp/youth-unemployment-rate.htm
Founded on the inter-dependent integration model, the EU led by Germany adopted the patron-client model once the great recession began to impact the banks requiring massive capital injections. Intended to raise GDP and living standards in the periphery countries that joined the euro-zone, the inter-dependent integration model was replaced with the patron-client model on which NAFTA and other US-dominated Inter-American trading blocs are based. The goal was for the hegemonic country to capture greater market share under low tariffs and low asset values ranging from labor costs to raw materials.
Under the aegis of Germany, the EU adopted the patron-client model in order to remain competitive on a world scale by transferring capital from the periphery to the core through austerity measures as well as neoliberal policies. These measures entailed the considerable downsizing of the public sector that sold public assets to corporations, lower wages and benefits, deregulated market in everything from pharmacies to transportation, lower taxes and loopholes for big business while small businesses found it more difficult to compete because their taxes and costs of doing business were higher.
Because it imposed on its members budgetary deficit restraints as part of the neoliberal economic course, the EU forced its members to eliminate the state as an agent of stimulating growth in the periphery countries. There are many ironies in all this, but I will only mention two as glaring examples. First, privatizing public utilities and selling them off while eliminating public service jobs was self-serving for the core countries where the private companies were based.
Interestingly enough, France, for example, that had tried privatizing water, had such a bad experience that it reverted back to public control, given the issue was both of cost and health. Second, behind the change in the integration model and neoliberal policies were some of the most corrupt banks in the world, including Deutsche Bank which is still waiting to find out the amount of fine imposed by the US Justice Department - originally $14 billion, but still in negotiations for a reduction. These multinational corporations driving policy not just in the EU but across the world and backed by the IMF and World Bank brought immense pressure on the periphery to adopt austerity measures that further wrecked fragile economies and made them more vulnerable to foreign economic dominance.
The illegal and fraudulent practices of banks included not only deceptive practices in residential mortgages and fixing rates, but money laundering, tax avoidance and terrorism financing, all of which the EU Commission has admitted drained capital from state treasuries and undermined the economies. The “Panama Papers” of the law firm Mossack-Fonseca revealed that major banks including many in the EU were deeply involved in illegal activities including transferring funds into offshore companies where money is hidden from tax authority. People are well aware that tax evasion by the wealthy entails that the tax burden falls disproportionately on the middle and lower classes. The EU, member governments, and the financial elites expected the average citizen to bail out the banks in the aftermath of the recession in 2008, never raising the option of fair and shared sacrifice.
Concurrent with the change in integration models was the very clear and sharp decline in the social welfare state and rise in corporate welfare and neoliberal policies that transferred income from small businesses and professionals that make up the middle class. Governments also launched an assault on labor unions and workers with the goal of exacting concessions on wages and benefits, diluting collective bargaining and strike laws, and imposing longer working hours. The argument was that workers were to blame for the recession because they enjoy generous wages and benefits. By embracing anti-labor and anti-middle class policies, governments of conservative, centrist, and Socialist parties across Europe began to lose credibility that the social contract at the national and regional levels was working for the benefit of all people. For their part, the EU, member governments and its apologist argued that downsizing the social welfare state and lowering living standards from the broader working and middle classes was necessary to remain competitive with East Asia where wages were low.
Globalization under neo-liberal policies resulted in a sociopolitical reaction across Europe and polarized the electorate looking for alternatives to the mainstream parties. However, the ultra right wing was far more serious in opposing the EU than the non-Communist left running on reformist platform but invariably co-opted by the neoliberal establishment. Italy’s referendum defeated by both the reformist left and the extreme right was the latest example of voters rejecting the government’s anti-labor neoliberal corporate welfare policies intended to concentrate capital in the name of ‘saving the ailing banks’ while calling it ‘reform’ as though it is beneficial for the majority of the people.
Italy’s Referendum and its Symbolic Significance for the EU
On 4 December 2016, Italian voters dealt a major symbolic blow to neoliberal-corporate welfare policies that the EU has been imposing across the continent since the start of the great recession in 2008. Voters rejected Prime Minister Mateo Renzi’s proposals for a stronger executive and a weaker legislative branch intended to push through neoliberal and austerity reforms that large banks and corporations demanded at the expense of smaller businesses, the middle class, and workers whose living standards have been on a steady decline since 1994 and accelerated after 2009. In 2006, Prime Minister Silvio Berlusconi tried a similar reform of the constitution of 1948 but he did not have any better luck than Renzi ten years later. The goal was a stronger executive to pass legislation that would benefit big capital within the EU.
With the decline of the middle class came lower living standards for workers and higher poverty rates, with more young educated Italians leaving their country for a better job; a process that will accelerate in the coming years regardless of whether Italy stays or leaves the EU. Italy is the Euro-zone’s fourth largest economy and the world’s eighth largest in nominal GDP along with Brazil. Interestingly enough, like Brazil, Italy has major structural problems. Its rising public debt is at 133% of GDP, but without the large informal economy estimated at $233 billion in 2014, debt to GDP ratio is closer to 150%. This is accompanied by unemployment of 11.6 percent, or three times higher than Germany’s but half of what Greece and Spain. Unlike Greece which has no industrial sector of any consequence and relies heavily on imports while suffering from unsustainable public debt and high chronic unemployment and underemployment, Italy has a solid industrial sector that offers some hope for its massive public debt problem and banking crisis.
To address both the public debt and banking crisis, Renzi, backed by finance and corporate capitalists as well as the entire weight of the EU establishment, proposed a corporate welfare scheme to transfer income from the middle and lower echelons of society to the banks and corporations. This was intended to keep the banks under private control by injecting public funds, rather than nationalize them. The prime candidate for nationalization is Banca Monte dei Paschi that has failed stress tests and it has considerable international links that could have consequences for the entire banking industry in Europe. Recapitalization and ridding itself of bad loans required more time than the ECB was willing to permit the bank to raise an estimated at 5 billion euros.
That the ECB rejected Monte Paschi request for state bailout just a five days after the referendum meant inevitable losses for shareholders and bondholders as well as Italian taxpayers. Of course the prospect for some EU assistance remained a possibility because of the domino effect fear across the EU. Against this background, if the US Justice Department imposes a heavy fine ($14 billion) on Deutsche Bank it would mean the only way to save that bank would be for the German government to bail it out and that would then set off another round of crises across the EU.
The political attempt to resolve Italy’s banking crisis suffered a temporary setback because the anti-austerity, anti-EU Five Star Movement opposed Renzi’s proposals along with the nationalist right wing xenophobic ‘Lega Nord’ (Northern League). For different reasons, all political parties opposed Renzi’s constitutional reform proposal, but it was the populists of the left and the right claiming victory over the neoliberals who represent international finance capital and the multinational corporations in Italy and in Europe. It should be kept in mind that former prime minister and billionaire Silvio Berlusconi, who in 2006 tried the same constitutional reform tactic as Renzi, sided with the Lega Nord against Renzi. This illustrates that not all Italian capitalists favored existing EU policies and the integration model, just as not all British capitalists favored remaining in the EU that they perceived as German-dominated.
Renzi announced his resignation because it was a clear defeat of his policies and a resounding rejection of the disastrous road that southern Europe has been following under the aegis of EU and IMF since 2010. Nevertheless, in the days after the vote, EU stock markets rose sharply and the euro did not lose its value as a reserve currency as the neoliberals had been warning to scare voters into supporting Renzi’s policies. Short-term stock market speculation aside, the reality of Italy’s GDP growth close to zero, youth unemployment at 40% right behind Spain and Greece, and an economy about the same size as in 2000 hardly speaks well for Italy’s progress under the aegis of the EU.
There are many dimensions to the Italian vote. I would like to focus on the following.
1. Why did Renzi call for the referendum? By substantially reducing the size of the senate, it would be easier for the executive to pass ‘austerity and neoliberal reforms’ through the Chamber of Deputies. The changes would entail hastening the process of tax and labor reform that would in effect weaken labor and transfer income from the broader social classes to the banks and larger corporations. Italian banks carry a disproportionate number of unserviceable loans – roughly one-third of EU’s bad loans for an economy inexorably linked to the rest of the EU and suffering a growing public debt.
Because the investment in Italian banks goes beyond the country’s borders, the banking crisis poses a major risk to financial stability in the EU unless reforms are enacted that would in essence transfer funds to strengthen the banks at the expense of the social welfare state and the working class. The insolvency of the Italian banking system will drag down with it the EU banking system under the ‘contagion syndrome’ that links the EU financial system, unless Germany permits the EU to inject billions to save the banks thus further driving down the value of the euro.
2. Why were public opinion polls wrong as they were in the case of the UK referendum and the US presidential election? By now people across the entire Western World cannot take seriously public opinion polls because in 2016 in three different countries the corporate media has been wrong about election results. First, the case of BREXIT clearly showed that public opinion polls were either manufactured or the polling companies deliberately preselected a targeted audience for their questionnaires, so that they could achieve the desired result and influence the undecided voters to join the fictitious majority. More or less the exact same thing took place in the US, although one could argue that Clinton won the popular vote and still lost the Electoral College.
Italy represents the third case in 2016 where public opinion polls were wrong leaving people to wonder if this was part of a pattern reflecting the interests of corporations backing a certain politician, political party or policy. It is one thing for polls to be off by the typical margin of error (3 to 5%) and another to be completely off the charts as in the case of BREXIT, USA, and Italy. If indeed they conducted honest polling, then one would think that they would be reconsidering the flawed method of research. However, it is hardly coincidence that corporate public opinion polls are not intended to reflect how people will vote but to influence the result. In short, polls have lost credibility as much as the biased corporate media that will go to great lengths to mold public opinion in support of neoliberal and corporate welfare policies as the panacea for the masses.
3. Was the Italian referendum a ‘personal issue’ and ‘insignificant’ as many European officials and corporate CEO’s contended? There were also those who argued that the vote reflected societal shifts within the country about national sovereignty and the EU’s role in hindering growth and development. It was amazing to watch various European TV programs where Italian and European corporate representatives and EU officials argued that the vote meant essentially nothing and ‘reforms’ (anti-labor, neoliberal and corporate welfare) must continue as though the peoples’ vote was a futile exercise. Some argued that Italians did not vote to leave the EU as did their British counterparts in summer 2016.
Others insisted that the vote was meaningless because it was all about personalities, namely Renzi vs. Giuseppe “Beppe” Grillo of the Five Star Movement and Silvio Berlusconi representing the populist right wing. Still others noted that this vote simply meant a more flexible policy toward the Italian banks by the European Central Bank. Some noted that the vote is not as serious because populists on the center left led by Beppe Grillo could never come together with the rightist populists of the Northern League. Therefore, the era of coalition government in Italy simply means a weak state that permits neoliberal and corporate welfare policies to prevail.
4. Did the Italian referendum weaken the EU and the neoliberal and globalization course or was it a brief pause until the establishment political forces with the backing of big capital mobilize for a new strategy of co-opting both the League of the North and the Five Star Movement? Russian politicians hailed the vote in Italy’s referendum as a blow to EU unity, but that may have been wishful thinking because the blow was not to the head of the EU integration model. Nevertheless, no matter how much lipstick and makeup EU apologists of globalization and neoliberal policies try to apply on this little pig, it is still a pig and voters across Europe see it as such. This is the reason that a percentage of them turned to populism on the right or the left, leaving an increasingly weaker centrist arena to become more right wing by embracing xenophobia and racism. In short, this is not just a matter of the banking crisis but a crisis in bourgeois democracy.
5. Do the Italian referendum, the US election of Trump, and UK exodus from the EU indicate a rising tide of right wing populism undermining globalization and neoliberal policies? It is indeed possible that we could see increased support for economic nationalist measures across the EU if the US goes that route as Trump has indicated. However, the structural course of globalization, neoliberal policies and corporate welfare are so deeply grounded in the political economy that it will be very difficult to reverse course. The symbolism of right wing populism is actually more important in so far as periphery EU countries may opt to follow this path that Trump and Putin hail as the new trend. Because the structure of the economy will remain essentially the same in the near term, living standards for workers and middle class will not improve and people will keep moving away from the centrist parties and toward the left or the xenophobic right, a phenomenon not just in Italy but across Europe.
As long as the EU represented the possibility of higher living standards and a higher quality life, people regarded integration in appositive light. Once the evidence began to show very clearly that the EU was a mechanism for the hegemony of big capital at the expense of the rest of society, the EU’s appeal began to decline. This manifested itself in right wing populism and ultra-nationalism across the continent, especially in Eastern Europe but also in France and Great Britain. Although Communist and non-Communist leftist political parties have expressed adamant opposition to globalization, neoliberal policies, and the patron-client integration model, political momentum rests with the right wing that has been riding the populist wave across Europe.
Imminent Demise or Temporary Setback for the EU?
Contrary to many analysts warning of Italy sending the EU into chaos if it voted against Renzi’s proposed reforms, Italy’s prospects after the vote are about the same after the referendum as before. Considering that the banking crisis of Italy can be dealt within the EU by an injection of both European Central Bank and Italian government capital combined with private and consortium investment, stability is possible although at a heavy cost to taxpayers. Moreover, despite the referendum, neoliberal and corporate welfare policies at the expense of social welfare will continue in Italy as they have in Greece, Spain, Portugal and much of the EU since 2010.
Given the relative absence of inflation in the EU, and the European Central Bank’s projection that inflation will rise from 0.5% in 2016 to just under 2% by the end of the decade, the policy of monetarism (keeping a strong currency by tightly controlling the money supply) has been responsible for capital concentration, low jobs-creation climate, and income redistribution from the middle class and workers to the top ten percent of the wealthiest individuals across Europe.
Speculation by many academics, journalists, stock market analysts, and politicians that the EU is on its deathbed seems motivated more by ideological and political factors in some instances or trying to influence securities speculation in other cases. In most instances, people simply analyze headlines circulating around the mainstream media. This is not to suggest that the EU is not at its nadir since the Treaty of Rome in 1957, not that the EU is more stable after the Italian referendum than before. However, it is one thing to argue that the EU is indeed suffering a crisis, and it is entirely another matter to underestimate its resiliency because of hasty analysis or because analysts are paid by firms speculating on the euro and/or bonds and stocks, or for ideological and political reasons.
Contrary to alarmist rhetoric from people in different ideological camps, as the world’s wealthiest economic bloc with NATO backing up its political and economic global reach, the EU is not in imminent danger of disintegration. Despite setbacks it suffered in 2016 with the United Kingdom leaving, Italy in serious banking and public debt crisis, and Greece remaining in permanent austerity mode after six years of EU-IMF measures that have only made the economy much worse than it has been at any time in its post-military Junta era (1974-present), the EU can revive assuming Germany and France modify the patron-client model of integration and dilute corporate welfare and neoliberal policies that have wrecked the economies and undermined bourgeois democracy.
BREXIT was indeed a major blow to the regional economic bloc, but the UK was never part of the euro-zone and its economic role will continue with some modest modifications that will result in higher indirect taxes for the consumers. Considering the performance of the stock markets across Europe, including England since BREXIT, the alarmist rhetoric about UK leaving the EU now appears overblown and indeed politically motivated to persuade UK voters to stay. Not just biased media reporting, but biased public opinion polls proved that big capital was determine to go to great lengths in support of maintaining the integrity of the bloc. The barrage of EU threats against Britain were also revealing about the lengths to which big capital and its political backers will go to oppose any model of economic nationalism, even if that model continues with aspects of neoliberal and corporate welfare policies.
The Italian referendum was a major setback for multinational corporations, banks and neoliberal-corporate welfare advocates. However, it is a stretch to argue it signals the beginning of the end for the EU. The doomsday rhetoric about the consequences did not materialize immediately as the pro-EU forces claimed and the European Central Bank as well as central banks of individual member nations is prepared to support the regional bloc with injections of capital.
Because Italy’s banks need time to recapitalize and Moody’s rating agency changed Italy’s outlook from stable to negative, short-term stock and bond speculators influence the entire political landscape about EU’s dim prospects when combined with the reality of a rising anti-EU right wing xenophobic tide across Europe. The current ECB 80 billion euro a month of bond purchases continued until March 2017 and scaled back to 60 billion until December 2017 is intended to stimulate growth in a sluggish regional economy. Monetary policy is a major tool that keeps the regional bloc viable. Considering the modest GDP growth of the core members of the EU, combined with the stronger than expected revival of China’s economy in the second half of 2016, the world’s largest trading bloc will remain strong but still wobbly in the next five years.
Neither BREXIT nor Italy referendum will bring down the EU, but the glaring contradictions within the regional bloc will. One such contradiction is that members share a common currency and each member government must abide by certain fiscal policy restrictions despite the obvious uneven structure of the region’s economies. It defies rudimentary logic that import-dependent southern and Eastern EU members share the same hard currency as Germany that is a major industrial power on a world scale. This contradiction points to further problems that will only become worse under the current patron-client imperialist model which further strengthens the strongest members at the expense of the weaker ones.
Europe’s ‘periphery economies’ (Southern and Eastern Europe) cannot sustain long-term growth and be regionally or globally competitive under a hard currency, fiscal and trade restraints imposed by the EU intended to continue with neoliberal policies, and an integration model designed to strengthen the strongest members at the expense of the weaker ones. Nevertheless, the large companies and capitalists in the regional economies share common interests with their northwest EU counterparts and they enjoy considerable political influence in their respective countries’ political decision to stay in the EU.
Besides the scenarios under which the EU will dissolve revolve around the inescapable contradictions of the regional bloc, as I noted above, there is also the political decision of the larger members to end the bloc under pressure from national elites advocating greater national control of the economy and society. Unless Germany and France as the largest members and pillars of the bloc since the 1950s decide that it is time to end integration because their national economies would be better off, the EU will continue to exist until the next global recession.
Even if the EU dissolves after domestic and regional political and economic pressures because it will cease to serve the majority of the people, a new integration model of European trade-financial realignment will replace the existing one. Geography cannot change any more for Europe than for the Western Hemisphere. For the near future, there will be some policy modifications at the national level and by EU at the central level in Brussels to accommodate the rising tide of right wing populism and critics from the left demanding to save the social welfare state. It is inevitable that the pro-EU political parties would be able to mobilize support and win elections because they will move closer to the positions of their right wing populist political opponents.
Alarmist rhetoric is in long supply by political element on the extreme right because they espouse nationalism inseparable from xenophobia and racism. They see EU integration compromising their national sovereignty and they use the migration issue as a fear mongering tactic. Encouraged by the rising xenophobia amid the wave of Middle Eastern and North African migrants, Marine Le Pen of the French National Front and other ultra-nationalists across Europe has been riding the wave of anti-EU populism but with limited success as the elections in Austria showed in December 2016. The containment of the far right is partly due to the conservative parties adopting some of the right wing rhetoric and espousing the platform of the far right, especially talking tough about migrants, blaming largely non-white, non-Christian immigrants for all the problems facing the white Christian continent.
The transition from the EU inter-dependent model of integration to a patron-client imperialist model that Germany espouses will eventually precipitate the downfall of the EU from within as the regional bloc is the cause for massive wealth concentration and increased social and geographic inequality. Considering the widening gap between the few wealthy and the increasingly squeezed middle class and workers, there will be more social and political instability forcing people to choose between the populist right wing political camp and the varieties of center-left and left political parties.
There are many positive elements about European society that enrich it and make it unique in the entire world and permit it to make worthy contributions to its citizens and to the world. Those include the absence of capital punishment and respect for human rights, openness to global cultural influences, diversity of newspapers and political parties representing the entire political/ideological spectrum from the far right to the far left, identity with the nation-state and the EU, to mention just a few things that make EU members more democratic than many other advanced nations, including the US where authoritarianism has become mainstream and not just because of Trump who only reflected prevailing trends and took advantage of them to secure election to the presidency.
There are also very dreadful elements of European policies. Those include the expansion of NATO and huge defense budgets in the post-Cold War era intended to carry out direct and covert military campaigns with the US as the senior partner under the pretext of ‘the war on terrorism’. The direct consequence of such militaristic policies have been jihadist attacks on innocent people in European cities, which in turn has entailed a sharp rise in Islamophobia and xenophobia as the platforms of conservative and extreme right wing political parties. These scapegoat issues distract from the core ones that concern the integration model and social order responsible for the downward mobility in Italy and the periphery member nations.
Naturally, the mainstream media and politicians reinforce xenophobia by the manner they cover related issues, thus contributing to public distraction from the core issues. Given the current economic, and sociopolitical trends, Europe will find itself at some point in the not too distant future in the same course toward authoritarianism as the US. In a continent that has experienced Nazism, Fascism, and varieties of authoritarian regimes in the last century the signs are evident that indeed history is not a steady Hegelian line of progress but one of regression that reflects the irrational in human nature.
Saturday, 19 November 2016
Wednesday, 9 November 2016
America’s Future after the Presidential Election of 2016
Right wing political groups throughout the world are celebrating Trump’s victory but rather prematurely. They traditional conservatives and liberals are sufficiently delusional to believe that they are somehow far removed from Trump-style authoritarian politics when in fact they laid the groundwork for Trump to succeed. Meanwhile, some traditional conservative political leaders around the world are wondering if right wing populism flirting with Fascism is the way to political victory, never questioning if their policies drove people to the far right. Others are questioning if BREXIT and the Trump victory really mean popular discontent with globalization under the neoliberal development model. Many analysts are already decrying the rightwing course of the American electorate, as though Clinton was a New Deal Democrat rather than a Rockefeller Republican with a more pro-Wall Street and more hawkish foreign policy than Trump.
Political correctness aside, the US was already a quasi-police state before Trump under both Bush and Obama. Therefore, the socio-cultural-political landscape was fertile for the new populist Republican leader, especially considering the corruption scandals that plagued Clinton. It is not at all the case as many have argued that US democracy suddenly became bankrupt because of Trump’s victory, because this was the case throughout history, with some exceptions when reformism became necessary to strengthen capitalism under the pluralistic society as during the Progressive Era and New Deal.
Behind the new authoritarian figure that will become America’s president, and behind the Republican victory of both houses of congress, the real power is corporate America as it always has been. Wall Street, not Washington, will determine policy under Trump who promised economic nationalism vs. globalization, isolationism vs. interventionism, job-growth oriented economy vs. jobs export oriented economy. Mainstream politicians, the media, and the entire institutional establishment have always projected the image that elections are equated with democracy.
The establishment wants people to believe that the electoral process affords legitimacy to the social contract. No matter how manipulated by the political class, financial elites and the media, elections put a stamp of legitimacy on what people believe constitutes popular sovereignty. As shocking as it was for many across the US and around the world, a Trump victory represents the illusion of democracy at work in a country where voter apathy is very high in comparison with most developed countries - the US ranks 27th in the world below Mexico and Slovakia in voter participation.
Besides the illusion of popular sovereignty, elections inject a sense of hope for a new start in society – the eternal spring of politics intended to maintain the status quo. An even clearer picture emerges regarding the distasteful “steak or fish” choices, as President Obama alluded during the correspondents’ dinner a few weeks before the election to indicate with pride that there is no third political choice. The larger problem is the lack of differences between ‘steak and fish’ (Democrats and Republicans) in every policy domain, except social, cultural/lifestyle issues.
Of course, the very high percentage of ‘negatives’ for both presidential candidates and the absence of alternatives other than those that the political and financial establishment chose for people to give their final approval reveals that people were voting for what each side deemed the ‘lesser of two evils’ – the ‘steak or fish’ choice that the establishment places on the menu and then the media ‘guides’ voters to choose one over the other as though it really makes much difference. This is hardly a manifestation of democracy and a testament of a system far removed from popular sovereignty.
Unlike elections in many developed countries, American elections have an aura of finality about them. It is as though everything has been decided at the ballot box until the next election cycle and people must conform. Elections invalidate expression of dissident voices, but not for corporate lobbyists influencing legislation. Despite the aura of finality and the historic election of populist Republican supporting economic nationalism, after the presidential election the US remains more bitterly divided than it was during the last years of the Vietnam War under President Nixon; certainly more undemocratic because of the ubiquitous surveillance state and Homeland Security regime that is here to stay. Although these divisions are not expressed as part of a class struggle, given the absence of working class solidarity, they find expression in varieties of smaller social, religious and cultural groups at odds with each other.
This is not to suggest that the US is as authoritarian as other countries claiming to be democratic. Nevertheless, there is considerable underlying sociopolitical polarization in a country hardly democratic as its apologists insist. Because of factionalism (socio-cultural-religious conservatives, isolationists/anti-globalist libertarians, traditional fiscal conservatives), Republican infighting will invariably manifest itself when the executive branch tries to push measures that congress will reject because corporate lobbyists oppose them. Animosity within the Republican Party and between the two major parties in congress will result in more gridlock despite a sweeping Republican victory of all branches of government. This is what Wall Street wants. Gridlock projects the image that both sides are fighting for the interests of the people when they are really fighting on behalf of corporate interests. Nevertheless, they present the process as the essence of democracy and the media reinforces that view.
Trump’s quasi-Fascist America will be unacceptable to many Democrats who believed that pluralism and multiculturalism in a country with changing demographics must become a reality with a first female president symbolizing these changes. On the other hand, Trump voters will be very disappointed once reality sinks in that the flamboyant charlatan billionaires cannot deliver in the promise to make America great again in terms of raising living standards. Trump had raised expectations so high that he the first to be disappointed will be his own voters. However, he will deliver on the implied promise to take America back a few decades when white male supremacy was rarely questioned at home or abroad.
Just days before the election, a FOX NEWS poll of its own audience indicated far greater pessimism about the country’s future than the general population. These people also fear deepening division in the country because the liberal establishment is an anathema to their cultural identity. With a Trump victory, the Republican popular base watching FOX NEWS will be hoping that their right wing messiah will lead them to the promised land of the early Cold War of the 1950s and to the elusive American Dream of yesteryear. Disillusionment has already set it on the part of many on the progressive wing of the Democratic Party who see their dream of greater social justice far removed.
Regardless of Trump’s promises to improve the lives of the poor and the middle class by bringing jobs back home, the only certainty is the hegemony of markets over the state resulting in continued political polarization in society that has turned sharply to the right even more than it was under Reagan AND Bush-Cheney. Globalization and neoliberal policies (the model based on state empowering the private sector in every domain and incentivizing it through fiscal policy and subsidies) will continue no matter what Trump promised/threatened, and that will result in further capital concentration and downward pressure on middle class living standards and sociopolitical polarization will become more evident.
Parading the confederate flag and a hunting rifle, the Trump voter will continue to feel one with the apartheid culture of the past. Trump’s supporters will feel marginalized and will become more fanatical. By contrast, the Clinton voter supporting trans-gender rights and the woman’s right to choose will be optimistic that the time has come for pluralism to expand the all-inclusive socio-cultural net. By the end of Trump’s first hundred days, neither the Trump nor Clinton voter will see much evidence to celebrate a future rise in living standards.
Many academic economists, private investment firms, the IMF, the World Bank, and OECD estimate that low growth will be accompanied by market concentration and jobs exported to cheap labor markets, keeping American wages low in the coming years. The average median net worth of Americans ranks lower than 18 other nations and dropping as personal debt is rising. Misplaced optimism on the part of Republicans will soon be replaced with pessimism almost as intense as that of the Democrat voter.
Campaign promises to raise living standards have been made by every presidential candidate in the last four decades. Living standards have been declining and they will continue on that trajectory according to all studies on future economic prospects. Considering the low-growth global economic environment, the high US debt under a system that encourages more capital concentration and export of high paying jobs, no one expects inflation adjusted improvement in living standards during the next four years. Moreover, the low interest rates, which stimulated some very modest growth since the recession of 2008, are ending. The absence of monetary stimulus will further impact middle class credit and the consumer-driven economy.
Contrary to appearances, Trump will be limited in what measures he can pass through congress that relies heavily on wealthy donors and lobbyists for campaign finance.
The executive branch will be weaker than it was when Obama succeeded an unpopular president in 2008 amid a deep recession and US military intervention. The legislative branch will be more aggressive toward the executive branch than it was under Obama. The result will be greater political division that only helps corporate America. The share of the economic pie for the middle class and workers will continue to shrink This in no small measure because the sharp rise in the public debt will require higher indirect taxes, cuts in entitlement programs, and higher interest rates to attract buyers for US treasury bonds - presumably a risk free asset threatened by rising rapidly rising debt levels undermining the dollar’s value.
Besides the structurally weak economy under neoliberal policies and corporate welfare, several factors will lead to sharper political division in the next four years. First, Republicans will be predictably hostile to any Democrat policy proposal from background checks on guns to relief for college debt aimed to further the Democratic Party’s popular base. Second, many conservatives will use the Trump victory to rally popular support for an extreme right wing agenda to keep the populist wing of the Republican Party strong. Third, Trump already set the divisive tone by alienating every social group in the country, but was well rewarded for it, thus reflecting the ideological, political and cultural milieu of the American mainstream now entrenched on the far right of the spectrum.
People who voted Trump will feel vindicated about their attitudes toward women, minorities and foreigner from Latin America and the Middle East. As their living standards decline, they will become more fanatic. Their church leaders and local civic leaders along with right wing talk radio and FOX NEWS will encourage right wing fanaticism because they all have an ally in the White House. To appease the Republican voters, along with local law enforcement, many in the military generally accepting of a police state, President Trump will likely focus on an infrastructural development program to create some new jobs. At the same time, he will strengthen defense while fighting out with mainstream Republicans about rapprochement with Russia and withdrawal from regime change foreign policies.
Co-optation of the Popular Base
For both political parties, the biggest challenge will be to co-opt the masses while serving Wall Street and the defense/intelligence industry establishment. The Democratic Party is indeed an umbrella that includes elements ranging from Rockefeller Republicans especially suburban women opposed right wing populism, to progressive social democrats and even some espousing a form of socialism. As middle class living standards continue to decline, in accordance with IMF predictions among others, the ability of the Democrat party to remain a large umbrella will be diminished, especially after Clinton’s crushing defeat.
Unless the Democrats revert back to FDR’s New Deal politics of the 1930s, something that neoliberals and their wealthy donors adamantly oppose as do Republicans, the party will have to choose between remaining in the camp of Rockefeller Republicanism like Clinton, or abandon its neoliberal commitments and move closer to the Bernie Sanders camp.
The election of 2016 proved that Republicans have moved farther to the right than anyone could have predicted. Nevertheless, divisions remain between traditional economic/fiscal conservatives, some Libertarians, and populist socio-cultural-religious conservatives, including the Ku Klux Klan that endorsed Trump. For now, Republicans have the luxury to ignore the changing demographics – Hispanics and African-American voters along with younger voters.
No matter how charismatic the Republican or Democrat political leader, it will not be easy to compensate for the growing chasm between rich and poor. As much as ideology matters, in the end the Democrat voter cannot pay her bills with LBGTQ bumper stickers any more than the Republican voter can do so with the confederate flag. No matter the obfuscating political and media rhetoric about disparate social groups transcending social class, socioeconomic factors determine class as they always have. Both parties will try to indoctrinate their voters to live by ideology alone, as churches convinced the faithful masses that salvation of their soul was the only thing that matters.
Suppressing class struggle evident in all aspects of society, the media will continue to propagate for class collaboration using nationalism as the catalyst. Subservience to capital identified with the national interests is a historically rooted belief that has remained in the social consciousness as secular dogma and taught in schools as gospel truth. The media perpetually delivers the message that if there is a problem in the political economy the culprit is the political class, the elected official and not the financial elites; certainly not capitalism as a system engendering structural inequality.
Trump will be no different than politicians of both parties that try to distract public opinion by directing attention away from domestic issues to foreign enemies new and old alike; pursuing the dream of Pax Americana despite its costs and limitations in a multi-polar world order where East Asia plays a dominant global role. The only leverage of the US is to keep Asia divided by demonizing China, as Trump has done repeatedly. Demonizing a foreign enemy to distract from focusing on domestic problems worked during the Cold War to engender sociopolitical conformity amid the triumph of Pax Americana. In the absence of a Communist bloc, the counter-terrorism ideology that replaced anti-Communism will be intensified under a Trump administration because it is in the interest of the defense industries.
As we have seen since 9/11, there are limits and monetary and political costs to the counter-terrorism, considering that US policy and practices actually contribute to the growth of terrorism not its elimination. Even the most gullible right wing Trump fanatics realize that polluted water in Flint Michigan has nothing to do with ISIS, and everything to do with the massive tax breaks of the state’s Republican governor to corporations and the rich of that state. Similarly, people are aware that after several trillion dollars spent in Middle East wars and counter-terrorism, the US public debt has risen sharply and the economy weakened.
Sociopolitical Polarization under Corporatocracy
Even for the apathetic masses that do not bother with elections, the magic of the ballot box affords the illusion that people have a voice in the political arena. Politicians, pundits and the media remind the public that they have only themselves to blame for their elected officials. They rarely mention rich donors behind the political class that decides who runs for elected office. The realization that people’s prospects are not improving, that their children are not experiencing upward socioeconomic mobility, and policy works to benefit a small segment of society drives some to the extreme right and others to the left.
The weakened center that Democrats claimed to represent in fact causes more people to rebel from the right because it is socially and ideologically acceptable as it has deep historical roots going back to the Civil War. Trump’s victory offers ample proof of this reality. By contrast, the US, unlike many countries around the world, has no historical tradition of sustained strong left wing politics, and see right through the hollow liberal rhetoric behind which is Wall Street financial interests.
Just beneath the thin veil of conformity that the media, politicians and mainstream institutions promote, there is lingering sociopolitical polarization that will become more pronounced now that Trump is elected and legitimized neo-Fascism in America. The mainstream media actually reinforces sociopolitical polarization mainly caused by structural conditions in the economy and a political system representing corporatocracy (rule by the corporations). FOX News, right wing talk radio, among others advocates a more authoritarian/militarist/police state course for society. The rest of the media presents itself as ‘objective’ propagates for the façade of a pluralistic society that permits cultural diversity, but it is as committed to corporatocracy as the right wing. In short, corporatocracy led to the election of a populist Republican who is as close to an authoritarian leader and open to Fascism as any in the past.
Regardless of whether it supported Republican or Democrat candidates, the mainstream media in search of the culprit for the public debt is critical of social security, subsidized housing and health care for the lower strata of society, school lunches, and social programs. At the same time, the media echoes Wall Street in blaming government for the conditions of poverty that the political economy creates. Trump’s ‘drain the swamp’ slogan referring to Washington never mentioned the source of the swamp which is Wall Street and its lobbyists. Therefore, the media never blames corporatocracy but the elected officials serving it in order to preserve the system. By embracing the authoritarian Republican leader, the majority voters are revealing that they see greater hope for their future under such a regime that promises to fight corporatocracy than they do under a Democrat leader linked to Wall Street.
Political Co-optation Strategy
In their struggle to broaden their popular base, aspects of Bonapartism, the political strategy of projecting the impression of rising above classes, have been embraced by both political parties, especially the Republicans. Unless the political parties representing capital co-opt the disillusioned middle class and working class elements; unless they give them an outlet to express their disapproval with a political economy favoring the rich; unless they give them hope that the system works for them, then bourgeois democracy collapses and a form of authoritarianism ensues. This is already a reality in Trump’s America.
A precursor to Fascism in Europe, Bonapartism would not be possible unless all mainstream institutions and not just the political parties and media contributed to the promotion of institutional conformity. Although a segment of the population sees past such efforts at conformity and supports the reformist candidates – Bernie Sanders in 2016 - invariably those candidates are co-opted by the mainstream and bring along the masses. This was the case with Senator Sanders who managed to lead a grass roots movement only to deliver it in the hands of the Wall Street candidate, as Sanders described Clinton.
Partly because of the Sanders candidacy, Clinton succeeded to some degree in co-opting the progressive elements of the left into the Democrat Party. A continuation of the defunct Tea Party behind which was energy corporations and right wing billionaires, Trump’s populist ‘revenge anti-establishment politics’ was even more successful in co-opting the masses that the Democrats. While the Democrats efforts focused on de-radicalizing the progressive elements by securing loyalty of their leaders into the mainstream, Republican efforts focused on driving them even farther toward fanaticism as an expression of dissatisfaction with the Democrat status quo that implicitly castigated the corporate elites.
Co-optation of the masses by Republicans necessarily entailed a populist appeal to social/cultural conservatives, mostly angry whites who feel besieged by demographic and structural economic changes in society. Instead of analyzing the root causes of structural inequality built into the system, Trump backers blame other social groups, but refused to criticize the political economy because it is unpatriotic to question capitalism. They believe that if all minorities somehow disappeared and no immigrants ever entered the land, then their social and economic problems would disappear as well and their status would magically flourish.
Because of demographic changes and downward income pressures, the traditional Republican appeal confined only to fiscal/economic, and defense-security conservatives is no longer sufficient to elect a president. Revenge politics of extreme right wing populism was more the message of the Trump team promising to clean up Washington, to distance itself from the UN, dilute NATO, exit from international trade agreements or re-negotiate them, and discipline corporations while first incentivizing them so they do not take jobs into cheap labor markets overseas.
Disgruntled social/cultural conservatives liked Trump’s vitriolic rhetoric against the political and economic establishment, against minorities, Muslims, and women. His emotional appeal similar to that of the Nazi Party (‘give people someone to hate’) worked because Republican right wing populism has deep roots and offers hope for reverting to a racist/sexist/xenophobic America of the past instead of the one that exists now under current demographic and economic conditions.
The irony is that Obama’s America operated under a regime many would justifiably label quasi-police state and institutionalized racism was evident despite an African-American president. Police officers were shooting unarmed black males and a criminal justice system reflecting institutional racism not so far off what Trump and many of followers openly or covertly advocate as a reaction to political correctness and equal opportunity institutional access (affirmative action).
Weak Executive Branch, Strong Wall Street
Wall Street pharmaceuticals and defense-related stocks celebrated with a sharp rise to welcome a Trump victory. However, a weak executive branch is inevitable under the new president, but it should not be confused with a weak governmental structure typically characteristic of developing nations. In much of Africa, and parts of Latin America and Asia, states are unable to raise taxes and deliver basic services to their citizens. Although the state structure in the US is hardly like that of developing nations, there are signs that it is weakening at the expense of the masses under the neoliberal regime Trump will follow no matter his hyperbolic rhetoric against globalization. The only certainty about the US election outcome is policy continuity, which is what the markets want, regardless of a president-elected who mobilized popular support by appealing to racism, xenophobia, sexism and authoritarian style politics.
To maintain corporate hegemony over the state, Wall Street and the media it owns can only prevail if the legislative branch is compliant and checks the powers of the executive that may dilute corporate welfare policies in order to maintain the social order by providing certain basic social programs from affordable health care and social security to affordable education. One glaring contradiction of the political economy is that people must be convinced that their interest is inevitably linked to the fortunes of big capital and not contrary to it; that big capital is not responsible for declining living standards for America’s middle class and workers in the last forty years; and that the enemy is the politician.
The media helps to keep the focus on the politician (establishment political class of both parties) as the evil force behind the calamities that befall society; never on the capitalists on whose behalf the politician conducts policy. The media will always examine tantalizing stories of all sorts about the personal lives of politicians, stories that deserve attention because they reflect integrity of character. However, the media never examines the politician as a servant of big capital and the massive influence of corporate lobbies in determining legislation. The media will never cover social justice issues, because they lead back to the structural inequality built into the political economy. In other words, the business of perpetual mass indoctrination and distraction is essential to keep the majority under the illusion that they live in a democracy – rule by the people - when in fact it is Corporatocracy. In winning the presidential election, Trump gave the illusion to his followers that they have hope for structural change.
Culture wars and personality conflicts as distraction from social justice issues will remain front and center to distract people from focusing on the root causes of downward social mobility. While market hegemony is a reality of the nexus between state and capital, the media and politicians have convinced people into believing in the illusion of choice – ‘the future is in your hands’ and ‘the people have spoken’, as media headline read. The question for capitalists who were divided between Clinton and Trump is how to manage the economy and what role the state must play against the background of intense global competition and shifting balance of power from the West to the Far East. This is not to minimize the intense political rivalry, the partisanship of law enforcement and other institutions at all levels of government, or the ongoing struggle for policy influence.
CONCLUSIONS: Revolt of the Extreme Right
Trump’s victory temporarily sets into hibernation the majority popular base of the Republican Party while emboldening its more extreme right wing elements. There is nothing like the illusion of identifying with a political victory to appease those feeling marginalized among the lower layers of the social pyramid. Once it becomes evident that domestic conditions will continue as they have in the recent past, contrary to Trump’s lofty promises to the middle class and working families, disillusioned voters will have to be content with the Republican cultural agenda, strong law and order position, and strong defense policy. Republicans are more likely to support leaders advocating greater reliance on militarism and police state methods and less tolerance for dissent. The elements for an authoritarian society are already deeply rooted in the culture and will eventually come into the forefront more pronounced than ever.
Ironically, both Republican and Democrats are responsible for the underlying causes of a revolt by the masses rallying around a right wing demagogue appearing to be in a struggle against the establishment. Judging by the performance of the US stick market, the establishment knows he represents Wall Street and not the unemployed worker in Cleveland. The media has convinced the average American that it is anathema, un-American to rebel from the left against the unjust system but patriotic to do so from the right. With the exception of the Klan label, there is no stigma attached to rebelling from the right against the establishment which includes not just Washington but corporate America. The job of the right wing politician will be to co-opt the popular base and keep it loyal to corporatocracy.
While the corporate media sings the praises of globalization and subtly criticizes Trump’s economic nationalism, it can only carry that message up to a point without appearing unpatriotic. The dilemma for the corporate elites is not to be caught in contradictory messages when trying to rally support of the masses, something that has become exceedingly difficult because of the downward socioeconomic mobilization. This is where it becomes convenient to blame politicians, and to keep the executive branch weak and government divided so that people blame everything on politicians who are actually in gridlock in the first place because they differ about which segment of the economy and which corporations benefit more than others as a result of policy.
Political campaign promises are like happy endings in children’s novels. People enjoy reading and dreaming about such things but they do not really expect that everyone lives happily ever after. The lives of the vast majority of Americans will not improve no matter who had won the White House in 2016. Symbolically and not just because she is a woman, but also in terms of engendering greater social harmony among the disparate demographic groups, Clinton was better suited for the sake of continuity from the Obama administration. However, Trump will serve Wall Street and neoliberal policies and globalization just as faithfully because corporate America will give him no choice.
Because of objective domestic and international conditions in the early 21st century, the middle class is on a continuing downward slope that radicalizes people either on the right or the left will realize cannot be fixed by populist right wingers or mainstream Democrats. Hence polarization in society will continue and it will become much worse after the next deep recession in the US because the political economy is increasingly serving a much narrower social base than it has since the 1920s. Trump has broken all political and ideological taboos about crossing the line from traditional conservatism to flirting with Fascism. This is America’s political future and it has been here for some time only to manifest itself more candidly in Trump.