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Trump’s MAGA and Deregulation

Michael Roberts

Trump sees the United States as just a big capitalist corporation of which he is chief executive. Just as he did when he was the boss in the TV show, the Apprentice, he thinks he is running a business and so can employ and fire people at his whim. He has a board of directors who advise and/or do his bidding (the American oligarchs and former TV presenters). But the institutions of the state are a hindrance. So Congress, courts, state governments etc are to be ignored and/or told to carry out the instructions of the CEO.

Like a good (sic) capitalist, Trump wants to free the U.S. plc from any restraints on making profits. For Trump, the corporation and its shareholders, the sole objective is profits, not the needs of society in general, nor higher wages for the employees of Trump’s corporation. That means no more wasteful expenditure on mitigating global warming and avoiding damage to the environment. The U.S. corporation should just make more profits and not be concerned with such ‘externalities’.

Like the real estate agent he is, Trump thinks the way to boost his corporation’s profits is make deals to take over other corporations or to make agreements on prices and costs to ensure maximum profits for his corporation. Like any big corporation, Trump does not want any competitors to gain market share at his expense. So he wants to increase costs for rival national corporations, like Europe, Canada and China. He is doing this by raising tariffs on their exports. He is also trying to get other less powerful corporations to agree terms on taking more of U.S. corporations’ goods and services (health companies, GMO food etc) in trade agreements (eg the UK). And he aims to increase the U.S. corporation’s investments in profit-making sectors like fossil fuel production (Alaska, fracking, drilling), proprietary technology (Nvidia, AI) and, above all, in real estate (Greenland, Panama, Canada Gaza).

Any corporation wants to pay less taxation on its income and profits, and Trump aims to deliver that for his U.S. corporation. So he and his ‘adviser’ Musk have taken a wrecking ball to government departments, their employees and any spending on public services (even defence) to ‘save money’, so that Trump can cut costs ie reduce taxes on corporate profits and taxes on high-paid super-wealthy individuals who sit on his U.S. corporation board and carry out his executive orders.

But it’s not just taxes and the costs of government that must be dismantled. The U.S. corporation must be freed of ‘petty’ regulations on business activities like: safety rules and working conditions in production; anti-corruption laws and laws against unfair trading measures; consumer protection from scams and theft; and controls on financial speculation and dangerous assets like bitcoin and cryptocurrencies. There should be no restraint on Trump’s U.S. corporation to do what it wants. Deregulation is key to Making America Great Again (MAGA).

Trump has directed that the Department of Justice pause all enforcements under the Foreign Corrupt Practices Act (an anti-bribery and accounting practices legislation intended to maintain integrity in business dealings), for 180 days. Trump aims at eliminating ten regulations for each new regulation issued to “unleash prosperity through deregulation.” He has fired the head of the Consumer Financial Protection Bureau (CFPB) and directed all employees to “cease all supervision and examination activity”. The CFPB was created in the wake of the 2007-08 financial crisis and is tasked with writing and enforcing rules applicable to financial services companies and banks, prioritising consumer protection in lending practices.

Trump wants more speculative tokens, more crypto projects (as launched by his sons) and has started his own memecoin. Newly proposed changes to accounting guidance would make it much easier for banks and asset managers to hold crypto tokens–a move that pulls this highly volatile asset closer to the heart of the financial system.

Yet it’s only two years since the U.S. was on the brink of its most serious set of bank failures since the financial storm of 2008. A clutch of regional banks, some the size of Europe’s larger lenders, hit the skids, including Silicon Valley Bank, whose demise came close to sparking a full-blown crisis. SVB’s crash had several immediate causes. Its bond holdings were crumbling in value as U.S. interest rates pushed higher. With just a few taps on an app, the bank’s spooked and interconnected tech customer base yanked out deposits at an unsustainable pace, leaving multimillionaires crying out for federal assistance. This deregulation is “a huge mistake and will be dangerous”, said Ken Wilcox, who was chief executive of SVB for a decade up to 2011. “Without good banking regulators, banks will run amok,” he told the FT’s sister publication The Banker.

Trump’s deregulation mantra for his U.S. corporation is now being echoed by the EU and UK corporate states. The EU and the UK have already dropped agreed new international capital requirements for banks under Basel III, following the US’s lead. Former ECB chief and Goldman Sachs banker Mario Draghi is now yelling for an end to regulations operated by EU member states, which according to him “are far more damaging for growth than any tariffs the U.S. might impose–and their harmful effects are increasing over time. The EU has allowed regulation to track the most innovative part of services–digital–hindering the growth of European tech firms and preventing the economy from unlocking large productivity gains.”

In the UK, Chancellor (finance minister) Rachel Reeves asked that the financial regulators “tear down regulatory barriers” that hold back economic growth, suggesting that post-financial crash regulation has “gone too far”. The chair of the UK’s regulatory body for commercial trading, the Competition and Markets Authority, has been replaced with the former UK head for Amazon! The head of the UK financial ombudsman has also recently resigned, due to clashes over the government’s pro-business approach. Reeves wants a full audit of Britain’s 130 or so regulators to whether some should be scrapped. Reeves told senior bankers that “for too long, we have regulated for risk rather than growth, and that is why we are working with regulators to understand how reform across the board can kick-start economic growth.” That means de-regulate and risk-taking is the order of the day.

Now the EU’s Green Deal, policies supposedly aimed at decarbonising the economy, are being watered down to compete with Trump’s U.S. corporation. The EU commissioner responsible, Ribera, has already ‘postponed’ an anti-deforestation law for a year. Now she wants to cut the number of small and medium companies affected by existing environmental regulations and reduce reporting requirements, thus saving apparently 20% of the cost of regulation. Brussels has estimated the cost of complying with EU rules at €150bn per year, an amount it wants to slash by €37.5bn by 2029. “What we need to avoid is using the word simplification to mean deregulation,” said Ribera. “I think that simplification may be very fair . . . to see how we can make things easier.” But as Heather Grabbe, senior fellow at economic think-tank Bruegel says, these proposed changes “seem to go far beyond simplification which would make reporting easier, and they seem to be moving away from transparency, which is what investors have been asking”.

As for controlling fossil fuel production, forget it. Karen McKee, head of oil and gas major ExxonMobil’s product solutions business, told the FT that future investments in Europe would depend on regulatory clarity from Brussels. “What we’re really looking for now is action” and for Brussels to strip its “well intended” regulation back and allow industry to innovate, she said. “Competitiveness is the focus right now because it’s simply a crisis. We are achieving decarbonisation in Europe through deindustrialisation,” McKee complained. Apparently, the failure of European capital to invest and grow is all down to regulations on fossil fuel production and hindering corporations from competing.

It seems that all the governments are swallowing Trump’s strategy for his U.S. corporation. You can maximise profits if you remove all restraints and make deals. What Trump, the EU and the UK ignore is that de-regulation has never delivered economic growth and increased prosperity. On the contrary, it has merely increased the risk of chaos and collapse. And that means eventually, it damages profitability.

We only have to remember the ludicrous position taken by Britain’s Labour government before the global financial crash in the early 2000s to adopt what they called ‘light-touch regulation’ of the banks. Ed Balls, then the City Minister (now a talk show host) in his first speech to the City of London said “London’s success has been based on three great strengths—the skills, expertise and flexibility of the workforce; a clear commitment to global, open and competitive markets; and light-touch principle-based regulation.” The then chancellor and soon to be prime minister, Gordon Brown spoke to the bankers and said “Today our system of light-touch and risk-based regulation is regularly cited—alongside the City’s internationalism and the skills of those who work here—as one of our chief attractions. It has provided us with a huge competitive advantage and is regarded as the best in the world.” What happened next and where is Britain now?

Rachel Reeves has learnt nothing from the 2008 crash. In her first Mansion House speech as UK Chancellor last November she echoed the call for deregulation. But as Mariana Mazzucato pointed out, according to the OECD, the UK ranks second as the least regulated country in product regulation and fourth least for employment. And the World Bank continues to rate the UK one of the highest in terms of ‘ease to do business’.

But now it seems, in order to compete with Trump’s U.S. corporation, Europe and the UK must not only engage in a ‘race to the bottom’ over taxes (Reeves refuses to finance public services with a wealth tax or corporate profits tax—on the contrary she wants to cut the latter), Europe and the UK must also engage in a race to the bottom on deregulation. Even the Bank of England’s economists are worried about ‘competitive deregulation’ as it would inevitably increase the risk of a financial meltdown.

Anybody who has read this blog over the years knows that I think regulation over capitalist enterprises does not work, as proven by the global financial crash in 2008, the U.S. regional bank implosion in 2023 and many other examples in finance, business and services. There can be no real effective ‘regulation’ without public ownership controlled by democratic workers organisations. Deregulating may not increase the risk of financial crashes, or more industrial accidents or consumer scams or more corruption—these happen anyway. But it certainly won’t deliver more economic growth and better living standards and public services.

Indeed, that is why Trump’s corporate strategy is set to fail. Increased tariffs on other corporations may give Trump’s U.S. corporation a temporary price advantage but that could soon be eaten away by higher costs for things and services provided by rival national corporations that Trump’s firm still needs and must buy. Accelerating inflation is the risk. And that won’t go down well with the corporation’s employees. Moreover, making deals on trade and real estate or cutting taxes on profits has never led to significant rises in economic growth. That depends on investment in productive sectors. Most of the cuts in taxes will more likely end up in financial speculation by corporations and the super-rich.

If a corporate strategy fails, the CEO normally has to take responsibility and the corporation’s directors and shareholders can turn against the CEO. And if the corporation cannot deliver better wages and conditions for its workers, but only higher inflation and collapsing public services, that could lead to serious problems within the corporation.

[Michael Roberts worked in the City of London as an economist for over 40 years. He has closely observed the machinations of global capitalism from within the dragon’s den. At the same time, he was a political activist in the labour movement for decades. Since retiring, he has written several books. ‘The Great Recession – a Marxist view’ (2009); ‘The Long Depression’ (2016); ‘Marx 200: a review of Marx’s economics’ (2018): and jointly with Guglielmo Carchedi as editors of ‘World in Crisis’ (2018). He has published numerous papers in various academic economic journals and articles in leftist publications. Courtesy: The Next Recession, Michael Roberts’ blog. ]

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Imperialism’s Revival Strategy

Prabhat Patnaik

Donald Trump’s foreign policy has left commentators in a real tizzy. His markedly differing positions with regard to Ukraine and Gaza, in the first case apparently pursuing peace, and in the second asking for ethnic cleansing of an entire population, have left them wondering whether his influence on world affairs is a “positive” one or not. The reason for such bemusement however lies not in anything that Trump has done, but in not cognizing the phenomenon of imperialism. There can be little doubt that western imperialism led by the U.S. had pushed itself into a corner, where the choice was between either a disastrous escalation of the war in Ukraine even to the point of a nuclear confrontation, or a gradual erosion of imperialist hegemony. Donald Trump is attempting to extricate imperialism from such an impossibly tricky corner. The point is not whether he is “for peace” or “for war” or whether he is mindful of European interests or not; the point is that he is pursuing an alternative imperialist strategy that would rescue imperialism from this cul-de-sac, and he is in a position to do so because he is untainted by the earlier policy that created this cul-de-sac in the first place.

His method for re-asserting imperialist hegemony that was getting gradually eroded is a combination of carrot and stick. The basic assumption that underlay the provocation that produced the Ukraine war, namely that Russia can be made to surrender to western dictates as a result of it, has been proven false. Not only is it the case that Ukraine has been steadily losing ground during the war, but the economic sanctions against Russia that were supposed to “reduce the rouble to rubble” were totally counter-productive; the rouble, after a brief temporary fall, recovered to a level vis-à-vis the dollar that was even higher than before the sanctions, and, what is more, these sanctions produced a reaction where a challenge to the hegemony of the dollar came onto the agenda.

The Kazan summit of the BRICS countries posed “de-dollarisation” as a serious possibility. Unilateral imperialist sanctions, as long as they are directed against a few small countries can be quite effective; but when they target a large number of countries and that too countries as large, as developed, and as resource-rich, as Russia, they not only lose their effectiveness as sanctions, but encourage the formation of a bloc of countries arrayed against the entire dominant imperial arrangement that passes as the international economic order, and this alternative tends to draw into its fold even non-sanctioned countries.

This is exactly what has been happening and what Trump faced when he came to office. The stick part of his carrot-and-stick method is well-known. He threatened to impose heavy tariffs against countries that went in for de-dollarisation, which is a blatant imperialist act and against all rules of the capitalist game; after all any country according to these rules has the freedom to trade in any currency it likes provided its trading partner is willing, and also to hold its wealth in any currency that it fancies. To curtail that freedom by imposing high tariffs against such a country is blatant arm-twisting that no international order can explicitly endorse; but Trump as an open and unrelenting imperialist had no qualms about exercising such economic coercion quite explicitly.

His attempt to bring about an end to the Ukraine war is the carrot in this carrot-and-stick method. Instead of an alternative power bloc being formed against the U.S. and against western imperialism in general, an end to this war on terms that are not unfavourable to Russia will keep Russia out of any such alternative bloc. It will thereby undermine the on-going attempts at challenging imperialist hegemony.

Of course any end to the Ukraine war based on negotiations should be welcomed by all, but seeing this end as the outcome of a desire for peace, or as the pursuit of U.S. interests at the expense of European “security concerns”, is wholly erroneous. Trump is not on a peace mission, otherwise he would not have made the utterly belligerent remarks about Gaza; indeed capitalism is by its very nature against peace: as the French socialist Jean Jaures had famously remarked “Capitalism carries war within it, just like clouds carry rain”. It is a desire to put imperialist hegemony on a better footing that motivates Trump not a desire for peace. Likewise the question of European security is a complete red herring: European security was never threatened by Russia, and all talk of a threat of “Russian imperialism” overrunning Europe was just an excuse to justify NATO expansionism. So, there is no question of European security being undermined by Trump’s peace move.

Trump’s difference from the European ruling cliques arises on account of two different alternative strategies that imperialism can pursue at present. One is the old Biden strategy of aggression against Russia that had run into a cul-de-sac; and the other is an alternative strategy of ending the Ukraine war and weaning Russia away from an oppositional bloc against the hegemony of western imperialism. European rulers are wedded to the former while Trump is attempting the latter. One has to see the opposition of the neo-Nazi AfD in Germany to the Ukraine war in exactly the same terms: its extreme aggressiveness vis-à-vis Palestine in contrast to its desire for an end to the Ukraine war, is symptomatic neither of any general desire for peace nor of an unconcern for “European security”, but of a certain strategic position.

Of course Trump’s project of extricating imperialism from the corner to which it has been driven, is simultaneously a project of assertion of U.S. hegemony over the imperialist bloc as a whole. His slogan “Make America Great Again” is a project of recreating a world unquestioningly dominated by western imperialism with the U.S. as its unquestioned leader. It is a continuation in this sense of the strategy of making Europe dependent upon American energy sources that had been represented by the blowing up of Nord Stream II gas pipeline from Russia to Europe, allegedly by the U.S. “Deep State”.

There is however a major contradiction in Trump’s strategy. There is a price to be paid for “leadership” of the capitalist world; and Trump wants a “leadership” role for the U.S. without paying this price. The price is the following: the “leader” must tolerate trade deficits vis-à-vis other major capitalist powers in order to accommodate their ambitions and prevent the capitalist world as a whole from sinking into a crisis. This is what Britain had done during the years of its “leadership” and this is what the U.S. has been doing in the more recent period. Britain’s running a trade deficit vis-à-vis Continental Europe and the U.S. who were the other major powers at that time did not hurt it because it balanced this deficit, among other things, by claiming a surplus of invisible earnings vis-à-vis its colonial empire, the bulk of which was a cooked up surplus against which it extracted a “drain” from these colonies of conquest, with which it settled its deficit with other major capitalist powers.

Post-war U.S. however has not been in a similar “fortunate” position; its running a trade deficit vis-à-vis other major powers has made it sink deeper and deeper into debt. Its attempt to avoid getting even deeper into debt, which is a part of Trump’s “Make America Great Again” project and for which he is in the process of imposing tariffs against all its trading partners, in a situation where the overall demand in the capitalist world economy is not expanding because of the pressure from globalised finance capital to shun fiscal deficits and taxation of the rich for enlarging government expenditure everywhere, will only accentuate the world capitalist crisis, with a particularly heavy burden falling on the non-US capitalist world.

The Trump strategy for the revival of imperialism therefore amounts to having one’s cake and eating it too. His attempt to assert U.S. leadership while seeking to impose tariffs on others amounts to a “beggar-thy-neighbour” policy vis-à-vis the rest of the world. Such a “beggar-thy-neighbour” policy, which amounts to ensuring growth for oneself by snatching markets from others, is fundamentally inimical to the project of reasserting imperialist hegemony. If Biden had pushed imperialism into one corner, Trump’s extrication of it from that corner will only lead to its being pushed into another corner.

(Prabhat Patnaik is Professor Emeritus at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi. Courtesy: The author’s blog at networkideas.org.)