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Donald Trump
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Reality hits back

In the wake of the 2008 crash, we developed a form of schizophrenia.  We began talking about two economies: the “real economy” – the manufacturing and trade of goods and services that we mere mortals engage in – and the “monetary economy” – the daily exchange of computerised electronic numbers that most economists and politicians fixate upon.

The more astute among us will have noticed that the apparent “success” in the monetary economy has translated into abject failure in the real world.  It is true that the banks – and the rentier class that benefits from banking – have continued to grow on the back of massive taxpayer-funded bailouts.  But this has failed to translate into sustainable economic growth.  In the US and the UK, unemployment has only been avoided through lower wages, part-time and zero-hours jobs, and trading high-skilled/high-paid employment for low-paid/low-skilled work.  In Europe, outside Germany (which benefits from the Euro’s relatively low value) the economy has been flat for the best part of a decade; while the Mediterranean countries have been experiencing an economic catastrophe.  Even the countries that were meant to stimulate global economic growth – Brazil, India, Russia and China – are either in or on the verge of economic freefall.

The “markets” were rigged, of course.  Nobody seriously believes that the Chinese economy is growing at seven percent per year.  Nobody really thinks you can buy physical gold at anything like the prices quoted for paper claims on gold.  Nobody believes that you can make a profit selling $100 per barrel oil for $30.  But the financialisation of everything helps to keep the illusion alive.  Take Caterpillar – the company whose trucks are the backbone of the global mining industry.  Its shares are trading at all-time highs (most likely the result of buying back its own shares) even as its sales figures show an alarming slump.  Or take the Baltic Dry Index – the cost of shipping all of the goods produced and traded in the global economy – which has slumped to record lows* even as world leaders try to cheer-lead us into believing that all is well.

The fact is that the monetary economy is like a tumour that is sucking the life out of the real economy that 99 percent of us depend upon.  It is destroying jobs, undermining savings and pensions, and leaving most of us even more vulnerable to an economic disaster than we were in 2008.  The truth is that the living standards of most ordinary people in Europe, the USA and UK have been falling in real terms since the 1970s.  Only the massive expansion is debt and a house price pyramid scheme disguised this.  And since 2008, even the myth of debt-based prosperity has faded.

After the crash, people were prepared to go along with the “we are all in it together” myth in order to get the economy back on its feet.  The best part of a decade later, increasing numbers of us now realise that there isn’t going to be any “back to normal”.  We are no longer in it together – we are increasingly out for ourselves.  And this is leading to some pretty nasty politics.

In Europe we have already seen the rise of extreme right and left parties gathering mass support because of their anti-establishment stance.  In Britain, UKIP secured sufficient votes in last year’s general election to deprive Labour of the seats it needed to form a government – something that paved the way for the rise of Jeremy Corbyn.  In the USA, the same disillusion and discontent has fuelled the spectacular rise of Donald Trump and (to a lesser extent) Bernie Sanders.

Writing in the Guardian, Thomas Frank points out that despite the media focus on Trump’s racism, his main message is about the appalling trade deals the successive US presidents have entered into.  It is no accident that Trump is picking up white working class voters in areas of the USA that have been betrayed by corporate interests that used NAFTA (and will use TPP and TTIP) to export jobs overseas.  Nor should it surprise anyone that UKIP scored their best results in traditional (Labour) working class areas where unemployment and low wages have become ingrained.

Just like Britain’s Brexit campaigners, Trump’s main appeal is to those who want a better deal – one that the establishment parties simply cannot deliver.  In this, Trump may be an unappealing populist, but he may also be the last US leader to use democratic means to take hold of the reins of power.

The point is that this is not going to go away.  The days of centre ground politics have been confined to the same history books that talk about the great moderation and the end of history itself.  As the real economy collapses, moderate politics may be its first casualty.

*Some of the fall in the BDI is due to an increase in the number of ships ordered prior to 2008.  However, even accounting for this, the BDI is telling us that the global economy is in a crisis of under-consumption.

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