25 October, 2021

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Further Reflections On Post-Trump USA

By Kumar David

Prof. Kumar David

Prof. Kumar David

There have been about 60 comments on my piece on Wednesday about whether Trump populism is similar to Mussolini populism (neither it, nor conditions in the US, have any resemblance to Hitler and Germany in the 1930s). Most comments were additions and adumbrations, several were debates between commentators and of course there were a few abusive messages that Colombo Telegraph readers have learnt to ignore. I do not need to get involved in the nitty-gritty of the exchanges; its healthy so let it go on. There are three substantive issues that are worth pursuing. They are Racism, a technical point about US economic un-competitiveness and thirdly how likely it is that Trump will ditch his promised programme. First let me mention that Hilary polled 58.91 million votes, a fraction more than Trump’s 58.86 million.

Racism

Trump’s racism was anti-Latino not anti-black. His boorish outbursts against Mexicans and Latinos are a case of driving up the ramp for opportunism. Lanka has been a victim of opportunism and it has destroyed unity in the country. It is said that SWRD was a sophisticated and educated man, not an intrinsic racist; he whipped up Sinhala sentiment as a tool to come to power, but the sorcerer’s apprentice consumed the sorcerer – he lost control of his own creation. JR’s case is worse because he was a racist in personality and it was no wonder he egged on 1983. The consequences were Indian intervention and a prolonged civil war. Even in a worst case scenario, if Trump unable to deliver his promises to estranged white working class and anti-establishment America, tries to incite racism I do not think the consequences would be anywhere near tragic as these examples. Nevertheless race baiting will do some harm and I want to devote two paragraphs to the matter.obama-and-trump

“What s joke this bugger is!” “I’m deaf to whatever he says”

An underlying factor is that the white population will fall to 46.6% according to the Bureau of Census and Statics by 2050 (quoted in Wikipedia); Latinos will rise to 28%, blacks14.4% and Asian-Americans 7.7%; just over 5% will be of mixed descent. Ethnic problems are confounded by economic decline and not withstanding that the US at this moment (late 2016) is doing best among the advanced capitalist countries, most economists are wary about the next two to five years. Even an establishment bastion like JP Morgan-Stanley reckons “the probability of a recession within three years is a startling 92%, and the probability within two years at 67%”. Worse both British Marxist economist Michael Roberts and my friend Prof Harsha Sirisena in New Zealand emphasise, economic policy tools such as printing money, cutting interest rates or increasing government spending are not available. These tools have been used up, so there no way to avoid a slump. Trump will have to sip from a poisoned chalice! (Roberts: http://wp.me/pLequ-3su; Sirisena: personal correspondence).

Possible US recession

In my piece I referred to I proposed a very simple index called PP (productive power or potential) to denote how competitive a country is in global export markets. It was not intended as a fancy economic category but a guideline for simpletons like yours faithfully and other simple folk. My attention was the US manufacturing sector and I said let, PP = (MO/BP), where MO is manufacturing output and BP the human resources benefit package (wages and benefits like social security, employment benefits and free, or subsidised healthcare). Two amendments were proposed to this by Asela Dahana in a personal note and Kumar R in a 10 November input in CT’s comments column.

AD’s contention was that US wages are not disproportionately high and it is only the benefits part of BP that is out of kilter. This is not correct; wages in the US are the big contributor to BP. If we use $12 per hour as indicative, then it is more than 12 times the wage in Lanka and more than 12 times the wage in Bangladesh and India. It is also about 5 to 7 times the wage in China – depending on which city. The ratio of benefits is probably comparable (12+, 5 to 7 etc) – China gives free education and basic health care to all and subsidised or free housing; Lanka gives free education, healthcare to those in need and food and service (electricity) subsidies. Therefore the relative competitiveness of USA, Mexico, China or Bangladesh, are not changed whether you include only wages or benefits and wages in BP.

More important is can the US lower cost of production to beat global competition without cuts in wages and benefits? No, you cannot beat the iron laws of economics. US companies cannot circumvent a falling rate of profit and will not invest. Protests breaking out all over the US, even before Trump assumes office, show that slashing wages and benefits is out of the question. But Trump has to make good on promises of millions of jobs and vast empires of new industries.

US and EU companies are decamping in droves to China & Vietnam (all types of goods including digital products), Bangladesh & Lanka (garments), Mexico (white goods) and India (out sourcing) because it is more competitive. Can the US impose a 30 to 50% import tariff (depending on the good) to protect local manufacturers? If it does, it becomes a new sales tax on consumers. Money goes to the treasury from the consumer via customs collection. Consumers will revolt. Furthermore US exports will not export so long as costs remain 30% to 50% higher. If US firms are prevented from shipping goods back home if plants are moved overseas they will register overseas to become foreign firms. I may be a simpleton but I just don’t see any way out of this comprehensive jam.

What to include in BP

Commentator Kumar R argued that the denominator BP in my little formula should in addition to wages and benefits include profits. The logic that if profit expectations of a country are high it will be less competitive is correct. Ok but let as think this though together. MO in the numerator depends on capital stock, investment, productivity and work-force skills. These are all stable and change slowly over time. Similarly wages and benefits cannot change fast unless there is a coup like 1973 in Chile or a massive onslaught like the Regan-Thatcher neoliberal attack on rights. Company profit targets are subjective and can change quickly. Their inclusion may not lead to a stable but a volatile index.

But KR, the more important point is unless you are saying that there is a vast difference in profit levels between say USA, China, Mexico, Bangladesh and Lanka the relative positions are not likely to be affected by whether you include or exclude profits in BP.

Maybe Trump will be trumped

There is a way in which Trump can survive; quietly ignore campaign promises and continue (with face saving cosmetic changes) Obama policies. After his meeting with Obama I have a sneaking suspicion that this may be the way things will slide. Notice that stock markets are heaving a sigh of “no change” relief.

It is too early to say but here are a few pointers to look for.

a) Continue Obamacare (with face-saving cosmetic brush-ups of course) since it is impossible to throw out 20 million or to withdraw pre-existing conditions cover.

b) Erect no tariff barriers against China, Mexico or anyone else. Some cosmetic hand-shaking of course.

c) “Renegotiate” NAFTA and pretend some fixes were made but no fundamental change; retain the Trans Pacific Partnership; take up the trade deal with Europe (TTIP) again under another name if necessary with small changes and call it “a diamond standard”.

d) No real change at all in foreign policy. Current framework to continue in Syria-Iraq, Tehran Nuclear Deal, South China Sea, N Korea, Japan Umbrella and NATO. (See also # below).

e) Forget about “millions of new jobs” and trillions in investment. (See also * below). Let employment and GDP grow at the Obama-rate.

f) Forget about cuts in welfare benefits; don’t touch abortion.

g) Promise to block visas for Muslims, even temporarily, will be ignored.

h) Forget about Mexico paying for the Wall if it is built at all.

i) Apologise to Latinos.

This is a to-watch list of 9 items; let us tick off as we go. It is too early to say how many will get ticked. When we reach 4 ticks we can say “it’s just continuation”.

# Relations with Putin will improve but will drive a hard bargain such as easing sanctions and lessening pressure (nuclear placements) in Ukraine and the three Baltic States. In exchange Putin will concede some face in Syria/Aleppo. The NATO allies and Japan will cough up a bit more money to save him face so long as it is small and cosmetic.

* He will have to do the tax cuts he promised. This promise is hard to avoid. But how will he recoup the losses? Cutting welfare and benefits will provoke a backlash on the streets and in the rust belt.

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Latest comments

  • 3
    9

    About (h) building a wall at the Mexican border. Estimates say it will cost around 10 trillion dollars. If Trump builds it he will really need it. Not to stop Mexicans coming in but to stop Americans leaving searching for jobs in Mexico.

  • 9
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    You have lot of confidence to be an economic and political analyst for america because you are an engineer living england or nearby I suppose.

    There are no perfect systems. So, some how Trump won. Yet, you fell stingy to give the win to Trump.

    I think you are a communal-Marxist. Yet, you support a neo globalist – Clinton who support multinational giant companies, globalization and bullying small and weak nations and building shanty nations because that is what keep them floating.

    when make-shift economists propose economic indices, if some one criticizes it, you say abuse.

    I think american recession began just at the time when George bush Junior became the president. He tried to turn it around by going to war with poor countries. He was intelligent and he was good with russia. Anyway, since then america is in recession. It is not a easy to thing to turn around even though Trumps wishes it otherway.

    Most of the things you propose, can not be achieved.

    For example, a wall between Mexico and California make the Californian farmers lose cheap labour which comes from illegal aliens. Even Trump had used them.

  • 1
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    By the way, just got the news that a special Pooja has been held in Jaffna prior to the elections praying for a Hillary victory. They call themselves “Tamils for Clinton” or some such thing.

    My question is there any group called “Tamils for Trump” or some such name? If not why not? If so where did they hold their Pooja?

    Can someone throw light on this please?

    • 1
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      The same group gave money to Hilary and they called them Tamils for HIlary. They gave money to Trump too but, did not call them Tamils for Trump, because they were not sure whether Trump would win.

    • 3
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      The Trump campaign was largely self- funded / he is a billionaire. He did not need any ‘dirty money’ like the Clintons.

    • 2
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      EDWIN

      There was a separate group called ‘Hindus for Trump’ and most of them were Tamil Hindus. Donald Trump loves the Hindus, he also wants to give a special place for Hindus in the White House…

      https://www.youtube.com/watch?v=xZYpK2bGMpY&app=desktop

    • 2
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      Edwin: Tamils for Trump & Tamils for Trump have been there for a while. Expat LTTERs have funded both Hillary and Trump.

      In fact a guy named Arulanandan is a Director of communications in the National Rifle Association (NRA) for many years. NRA paid for a lot of media advertising by Trump.

      In Canada & UK too, Expat LTTErs have funded as well as contested parliamentary elections from both main political parties.

  • 7
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    Trump won fair and square.. he is not perfect.. but much better than Killary .

    It is the Democrats who have played the racist card.. and they got the right answer from voters

    There is absolutely nothing wrong in being concerned about illegal migrants flooding your country.. and to want strong borders! That is not being racist!

    The Democrats have also made this world a mess with their policies of regime change.. hopefully that will change now!

  • 6
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    Hey, with all due respects to my former Guru, you forgot the investigations in to Emails and the Clinton foundation. As far as I am concerned, those are the most important things, because the Clinton foundation is the instrument through which the Tamil Tiger supporters want to destabilize little Lanka.

    I don’t care about Syria, Aleppo or Mosul (where the hell are they any way?) or any of the other things you have mentioned like Obamacare. (What the hell is it anyway? To take care of Obabam in his old age?) But I do care about Hillary’s Clinton foundation care that the TT supporters very much care about.

    Sorry Guru you get very low marks (2 out of 10) for this article because you forgot the Clinton Foundation. Supposing I gave the Power in an AC circuit as P = VI forgetting the all important power factor, how much would I have got in my student days? 2 out of 10. Well that is what you are getting from me now.

  • 2
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    Soooooooo…. The Power guru King Robert Kumar david has infact short circuited himself.

  • 4
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    Mr. David, I am going to give Trump a fair chance. If he addresses the concerns of the working class left behind by NAFTA and other bills that caused American capital to flee overseas he will do well. He has already toned down his rhetoric on Obamacare aka Affordable Care Act. He says he is going to deport the criminal elements. Do not forget in 1968 Nixon won on the silent majority who were also concerned about law and order. Give him a chance now. The big powerful Banks will probably not be able to bribe him in the way they do with regular politicians. People were tired of the status quo and gridlock. They were tired of big powerful rich people having their way. In fact now there are stories leaked allegedly by Trump’s advisors that he did not expect to win. So he is in for a shock. Governing this nation is not easy. So many challenges. Hillary did not have much credibility after so many missteps with the email issue, bungling in Libya etc. It just so happened even we who look at polls like FiveThirtyEight.com were wrong. There was a 13% undecided category just before election day compared to only 3% last time. So they mostly swung to Trump. Look at what happened in the working class states.

    • 1
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      Mano,

      Don’t you think that for the 13% undecided, the last minute “Comey-effect” was the principal driving force for the already exasperated voters. It was not a pro-Trump or racist/exclusionary motivation – it is not merely wrong but is dangerous to rush to such uninformed conclusion.

      • 0
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        “”was the principal driving force for the already exasperated voters. “”

        Principal?? No way because Don canvassed not for the popular vote but in areas that were always democratic for electoral votes as he mentioned.Whites who normally don’t vote came out because of `Heroin addiction and 15 million Mexicans most employed by big corporations.
        (the postal ballot was finished when Comey made that statement on Friday and he had 3 days more to go)

        Surgeon general: 1 in 7 in USA will face substance addiction
        An American dies every 19 minutes from opioid or heroin overdose, and Thursday’s report spells out the cost of substance abuse. The economic impact of drug and alcohol misuse and addiction amounts to $442 billion each year — topping diabetes at $245 billion, said Vivek Murthy, the surgeon general.http://www.freep.com/story/news/nation-now/2016/11/17/surgeon-general-1-7-us-face-substance-addiction/93993474/

        25 Jul 2016 – Donald Trump comes out of his convention ahead of Hillary Clinton in the race for the White House, topping her 44% to 39% in a four-way matchup including Gary Johnson (9%) and Jill Stein (3%) and by three points in a two-way head-to-head, 48% to 45%. That latter finding represents a 6-point …http://edition.cnn.com/2016/07/25/politics/donald-trump-hillary-clinton-poll/

        Who said it: Ivanka Trump or Hillary Clinton? – CNNPolitics.com
        http://www.cnn.com/2016/07/22/politics/ivanka-trump-hillary-clinton-women/
        22 Jul 2016 – Donald Trump would use the power of the federal government to “change labor laws” to ensure companies pay women and men equally, and he would pursue universal childcare policies if elected president, according to his daughter, Ivanka Trump, who spoke Thursday at the Republican National …

        • 0
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          Timbuttu,

          If as you say ‘Whites who normally don’t vote came out because of `Heroin addiction and 15 million Mexicans most employed by big corporations. ” then don’t you think that either.

          1. Mano’s point that “There was a 13% UNDECIDED category just before election day compared to only 3% last time.” is incorrect,

          or

          2. The Whites became “heroin addicted and concerned about the presence of 25 million Mexicans” only on the day before the election day (so as to become “DECIDED”).

          If one statement is right, then the other cannot be correct – would you agree?

          • 0
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            A couple of days ago Jesse Jackson said 15 million Mexicans and they are not responsible but the big cooperation’s- look how cheeky the socialist can be to say racist sexist etc. Jackson wants Obama to pardon Hillary but Trump wants to amend the 5th amendment.Trump would definitely tighten the nuts of both Obama and Hillary so he gets elected next time.
            All forecast were cocky because the unexpected and uninvited into politics.(Obama was invited by the hidden hand)
            Trump never gave a toss to media ratings Vis a Vis. He had his strategy well laid out unlike over confident Hillary after danger man Bernie Sanders caved in.(Bernie could never have won because he was too socialist for USA) The last 3 days Trump canvassed only in the very secure democratic states (while the media and Hillary laughed at it)- like most socialist states it’s full of crime drugs etc.(blacks may sell on the street and be addicted but many Gringoes love it) The strategy of 2 billionaire Moguls son in law Jared Kushner,(the 666 building $1.3 billion guy) drew the normal white democrats out of their shell. By 8 pm we all (in the telegraph and NY Times’) knew Trump was winning because the secure dem states had turned gop. Remember Americans are Americans `I` the husband votes one way and wife may vote another.
            The drug issue is not just with the takers but whole neighbourhoods being destroyed and nice folk being frightened of crawlers. By the way comments on yahoo have centered on this for several years.
            I don’t know how big your screen is to see both these pages side by side.
            http://www.270towin.com/live-2016-presidential-election-results/state-by-state/
            http://www.270towin.com/2016-election-forecast-predictions/

  • 0
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    In GPS Zakaria program yesterday on CNN, two college kids speak expertly on the polls and the statistics the pollsters use. It was a treat to watch them speaking so confidently with clarity and logic.

  • 1
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    Kumar,
    I fully agree with your view that Trump’s boorish attack on minority populations is “a case of driving up the ramp for opportunism” and is not different from what SWRD initiated that laid the foundation for a still-to-be-resolved, half-a-century long divide of the nation. My fear is that half-baked, rash, ill-informed diagnosis of Trump’s victory as reflecting pervasive racism in rural America could easily make it a similarly self-fulfilling phenomenon!

    Also, thank you for further discussing your simplified presentation on relative competitiveness. However, I think oversimplification has its own pitfalls.

    Does the fact that “U.S.’s $12 per hour being more than 12 times the wage in Lanka” actually dictate the “iron laws of economics” that necessarily diminishes US’s competitiveness? No, it does not.

    To take a simple example, US farmers earn possibly well over 12 times the wages of Sri Lanka farmers. U.S .still remains more competitive and is able to export grains to Sri Lanka, because each US farmer farms as much as 160 acres or more, compared to the puny land-holding per farmer in the low wage nations of Sri Lanka, India and Bangladesh. We will continue to import grains from the US and dairy from Oceania, never mind how many multiple times their wages and benefits out rank that in Sri Lanka! Germany, Japan and Britain are manufacturing powerhouses with export-advantage globally despite paying their labour the highest wages and benefits in the world. In fact, in the sixties, seventies and eighties, they were even more competitive with the rest of the world, despite paying their labour even higher multiples of wages than the Asian nations then. The wages in Asia has actually grown faster than in the US, Germany or Japan in the last fifteen years, during which period those powerhouses actually saw their competitiveness erode vis-à-vis the rest of the world. Isn’t that counterintuitive, if your theory is indeed correct? Should the West not experience higher rather than lower competitiveness as the wage gaps narrowed?

    It is the labour productivity to wage ratio that matters, not the straight comparison of MO/BP combined with the simplifying assumption of reasonably uniform MO across the countries. Therefore, on the question “can the US lower cost of production to beat global competition without cuts in wages and benefits,” the answer is actually yes, if productivity can be raised, then such high or even higher wages can be sustained without losing competitiveness. This is where the U.S. failed! In the comfort of the extended flow of benefits from space-technology of the sixties and seventies, U.S. callously failed during the eighties and nineties in meeting its research and development and educational necessities towards longer term growth.

    The productivity in Asia has grown faster in the last couple of decades compared to that in the West for obvious reasons. Starting at low-productivity levels, they had massive potential to grow compared to the Western nations who were already near the upper boundaries of productivity. Global integration promoted technology transfers and capital movements to get the Asian productivity on an accelerated path. It is the relative slackening in productivity growth in the U.S., combined with resource and technology gravitation to high-growth potential nations that stalled the manufacturing growth in the West – not the high wages as you suggest.

    Problems worsened even further for the U.S. as investors sought higher profit margins if they were to invest domestically. It is as a consequence that the profit component of the denominator began to squeeze out the wage and benefit component. I have already discussed additional demand side-issues that arose from this wage squeeze, and so I will stop here.

  • 0
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    Hillary Clinton has gone public by claiming that it was the CIA that was responsible for her defeat.
    There is also the Nostradamus prediction that Obama will be the last President of the USA! Knowing Prof:Kumar David,as well as I do,he will not buy the prediction.

    • 0
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      “There is also the Nostradamus prediction that Obama will be the last President of the USA!”

      How I wish Nostradamus will for once be right— and then how will a more civilized USA call itself?
      I guess that the Chinese monkey of recent fame may predict it far more correctly than all political pundits.

  • 0
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    Prof. Kumar David for discomfort intellectuals who supported Hillary been called out by the “basket of deplorable” as quacks. Time to accept defeat get back in the rabbit hole for next four years’.

  • 0
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    The people of the US did not have a meaningful choice.
    The Democratic Party bigwigs wrecked the prospect of a fielding candidate who stood for something worthwhile.

    Overall, between Trump and Clinton there was no real choice– but for deciding in whose name the country will take the road to self-destruction and in the process damage much of the rest of the world.

    • 1
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      sekara

      “Overall, between Trump and Clinton there was no real choice”

      Like Obama and previous other leaders, they are only presidents. They cannot do much and even Trump will be house trained within the first two years into his presidency by various powerful lobbies (including Military Industrial Complex, National Rifle Association, Wall Street, … )

      Does it matter who rules the USA?

  • 0
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    Sekera.

    Nostradamus has been right on two other occasions!
    Chinese monkeys or Chinese Dragons,I must say that Prof: Kumar David has class!

    • 0
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      True, but count the number of times when Nostradamus was wide of the mark.

      Class or not, the monkey (not the dragon) correctly predicted this result and the soccer world cup result (which, given the significance of the net outcome, was perhaps more important).

  • 0
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    sekera.

    You do seem to have taken great pains to count the number of times Nostradamus has been wide off the mark.
    Pray,could you share this information with the readers of CT?

    • 0
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      Plato
      I never cared much about Nostradamus (or for that matter any form of astrology or premonition).
      I just saw the following on the Interenet [http://doubtfulnews.com/2016/11/nostradamus-was-full-of-crap/]:
      “Here are other “predictions” of a Trump presidency:
      The Many Prophets Who “Predicted” Donald Trump’s Presidency: Everyone saw this coming, from Nostradamus to C.S. Lewis to Bart Simpson”

      I was plain amused that a monkey supposedly got it more correctly than political pundits.

      Can I quote you back: “Take it easy”!

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