Davos and the Donald

Today, US President Donald Trump delivered his keynote speech to the meeting of the global elite, World Economic Forum at Davos, Switzerland.  It was eagerly awaited by the corporate chiefs, finance and hi-tech social media moguls, as well as other government leaders.  Last year at Davos, the star of the show was Chinese President Xi who told his glittering audience that China was ready to take over the leadership in the fight for ‘globalisation’ and free trade as the US under trump stepped back and went down the protectionist road.

So Xi, autocratic leader of a one party state directed and controlled economy, became the darling of Davos.  Would the Donald take the prize this year.  After a tumultuous and often debasing year in office, Trump has managed to get through his Congress huge cuts in corporate and personal taxation that will benefit the profits of US multinationals and the incomes of top 1%.  But he failed to reverse Obamacare, that limited measure of subsidised private health insurance; he has yet to build ‘the wall’ to keep out illegal Mexican immigrants; and he has very little to stop Chinese manufacturing imports flooding into the US.

Sure, he took the US out of the Trans-Pacific Partnership (TPP) trade deal – a deal that ironically was designed to isolate China from trade and investment in the region.  And only last week he announced tariffs on imported solar energy equipment from China.  But that’s it.  He wants to renegotiate the terms of the longstanding North American Free Trade Association (NAFTA) with Canada and Mexico.  But little has happened.  In the meantime, TPP has been revived by the other participants, Canada signed a free trade deal with the EU and Japan is looking to do one with Europe too.

So it appears that globalisation (free trade and investment) is not being blocked much by Trump’s America First policy so far.  Nevertheless, globalisation and world trade has slowed sharply since the end of the Great Recession.  Global trade growth in the era of globalisation from the mid-1980s onwards grew faster than global GDP by an average ratio of around 2 to 1.  But since the Great Recession, it has barely matched a low world GDP growth rate.

It’s the same story with global capital flows, a major feature of the globalisation era.

Overall flows (direct investment, portfolio investment and loans) have flattened as a share of global GDP since 2007.

The United Nations Investment Trends Monitor, released Monday, showed a 16% decline in foreign direct investment worldwide between 2016 and 2017. FDI (foreign direct investment) flows dropped by more than a quarter in what the UN terms “developed economies,” with the US and the UK responsible for a large portion of that decline.

Cross-border mergers and acquisitions and “greenfield” projects — businesses building factories and other facilities in foreign countries — both suffered in 2017. The value of cross-border M&As declined by 23%, despite a 44% increase in value of cross-border M&As in developing economies. Greenfield-project value declined 32% to $573 billion, the lowest point since 2003.

The potential end of globalisation and the rise of populists and other nationalist leaders like Trump in many countries is really worrying the global elite meeting in Davos.  FT columnist Martin Wolf, who once wrote a book called Why Globalisation works back in 2004 before the global financial crash, reversed his view back in 2016.  He now feared that globalisation would be reversed to detriment of all.  And just before Davos, he told his readers that ‘democracy’ itself was threatened by protectionism and autocratic nationalist rulers, but admitting that globalisation itself failed to sustain prosperity and improve equality. On the contrary, the wild effusion of speculative capital eventually triggered the biggest financial crash since 1929 and inequality of income and wealth in the major economies had reached levels not seen in 150 years.

Just before Davos, Oxfam updated its estimate of global wealth inequality and found Last year saw the biggest increase in the number of billionaires in history, with one more billionaire every two days. This huge increase could have ended global extreme poverty seven times over. 82% of all wealth created in the last year went to the top 1%, and nothing went to the bottom 50%.

There are now 2,043 dollar billionaires worldwide. Nine out of 10 are men. Billionaires also saw a huge increase in their wealth. This increase was enough to end extreme poverty seven times over. 82% of all of the growth in global wealth in the last year went to the top 1%, whereas the bottom 50% saw no increase at all.  New data from Credit Suisse means 42 people now own the same wealth as the bottom 3.7 billion people.

Talk about the uneven and combined development of global capitalism!

There is currently huge optimism among the Davos elite that in 2018 world capitalism is finally recovering from the Great Recession of 2008-9 and ensuing Long Depression.  For the first time since the early 2000s, all the major economies are growing simultaneously.  Capitalism has never been more globally synchronised. But that has another side.  Capitalism has never more prone to international simultaneous crises.

The risk remains that if the US turns down, then so will all the rest.  And that could well be triggered over the next year or so by the rising cost of international debt as the US Fed and other central banks carry out their planned interest rate hikes (in the graph – when the blue line of Fed policy rate rises above the black line of US treasury yields, a recession usually follows.

Davos is the debating hub of the leaders and supporters of global capital and globalisation (free movement of multinational capital and trade without national restrictions).  Globalisation is part of the neoliberal project to maximise profits, although this aim is cloaked in the respectable mainstream economics view that it will bring growth and incomes to all.  The Davos elite see that this propaganda has been exposed by the evidence of global poverty and inequality.  But even worse, the leader of the largest capitalist power stands for protectionism and nationalism – at least in words.

Thus speaker after speaker, from Indian President Modi to French President Macron, mouthed support for maintaining free trade, while ‘recognising’ the need to ‘do something’ about inequality (and climate change – another Trump bugbear). “If we commit ourselves to make our current globalisation more fair..  we can converge and build a new globalisation.” Macron.  Thus the theme of Davos 2018 was to stop ‘fragmentation’ and sustain ‘fair’ globalisation.

So what did ‘the Donald’ tell the assembled Davos elite?  Well, he wants to “put America first, but not America alone”.  In other words, he aims to put the US in ascendancy in trade, investment and military power and for everybody else to get in line.  That’s the classic position of the leading imperialist power – so no change there.

The Trump administration aims to get a ‘better deal ‘ on trade with Asia (China) and Europe. And also it aims to weaken the dollar so that US export are more competitive.  US Treasury Secretary Steven Mnuchin has been going round Davos saying that “a softer dollar will juice US economic growth… because “obviously a weaker dollar is good for us as it relates to trade and opportunities.”   That did not go down well with ECB president Mario Draghi at his press conference yesterday, who pointed out that there was an international understanding that countries should “not target our exchange rates for competitive purposes”.

“We don’t even like to use the word ‘protectionism’ . . . We don’t use that word,” said Mnuchin. “This is not about protectionism. This is about free and fair reciprocal trade. Anybody who wants to do trade with us on reciprocal terms is welcome to do so.”  And in the same breath, Wilbur Ross, US trade secretary, has been talking about closing down the World Trade Organization and/or kicking China out. “It’s an old system, decades old. The world has changed, the economies have changed. The pecking order of countries has changed (ie meaning the US does not get its way any more – MR). Everything has changed. The WTO has not really modified its role. It needs to be updated, at best (ie the US needs to be in charge – MR).”

Protectionist trade policies and competitive devaluation are nationalist medicines for economic weakness and domestic slump.  But they only work (even then for just a limited time) as long as nobody reciprocates.  In the Asian crisis of 1998, Malaysia did not obey the IMF and opted for nationalist policies and it worked because all other Asian economies did what they were told.  But in the 1930s, when the US imposed tariffs, other countries followed suit and so aggravated the slump.

The point is that it is not ‘unfair competition’ in world trade that has caused the decimation of US manufacturing jobs since the 1970 but the decision of US capital to invest in technology to replace labour and to send their factories and units abroad to use cheaper labour.  Globalisation was the a reaction of the global crisis in profitability in the 1970s (as the previous wave of globalisation in the late 19th century was).  It was part of the neoliberal agenda to drive up the rate of exploitation and thus profitability.  But it did not last.

The global elite gathering in Davos fret that Trump and other nationalists will spoil the party and even end democracy.  But the Donald emerged because of the failure of global capital, as represented by Davos.  The Donald’s appearance shows that, as trade and finance stagnate, imperialist rivalry will grow.  And it will be labour that will pay for this once again.

16 thoughts on “Davos and the Donald

      1. Ummm, no sign of that in comments so far.

        Whatever the article might have been about “in a nutshell”, there is no sign that the comments result from having intellectually digested it as food for thought.

        Looks more like some spasmodic twitching of an unrelated train of semi-automatic reflexes. Perhaps triggered by some random association between the presence or perhaps even the absence of specific trigger words in the article that have predisposed some people who regularly make comments to either spout certain themes they have become habituated to spouting or react to that.

  1. So. So now you write “So Xi, autocratic leader of a one party state directed and controlled economy, became the darling of Davos.”
    What word is missing from that sentence? A word you use more than any other. What pray tell kept you from writing “a one party state directed and controlled *capitalist* economy?” Do you really think the elite of global capitalism don’t know a capitalist state when they trade with one? Especially when that economy is, if world capitalism were ever to recover a central driving force, the only economy showing the slightest ability to take that role? Or out of long inertia and intellectual rigidity do you still maintain that Chinese Stalinism, like the post-1938 USSR, is some sort of “noncapitalist” or “anticapitalist” ally to your cause?

    1. ”Or out of long inertia and intellectual rigidity do you still maintain that Chinese Stalinism, like the post-1938 USSR, is some sort of “noncapitalist” or “anticapitalist” ally to your cause?”

      I am afraid that personally I have not received any brilliant flashes of illumination from this rhetorical question. Fosforos will be acquainted with the opening of ”Capital”: ”The wealth of societies in which the capitalist mode of production prevails appears as an immense collection of commodities.” Money is the form of appearance of value, that is of a material embodiment of labour. ”All other commodities universally express express their values in a particular commodity because it is money” ( Capital Vol.1 p 187). ”Price is the money-name of the labour objectified in a commodity” ( p195).

      So can Fosforos inform us of the price of a factory, or an instrument of production or a ton of coal in Stalinist Russia? How about the former ”Chinese Stalinist” commune? Probably 1 in 7 of humanity laboured on them at the time of its existence. What was the nature of the wage labour so employed, if such a commune was indeed a capitalist undertaking?

      Such concrete demonstrations would certainly be an enlightening beacon to dissipate the fog of inertia that swirls around those of us who from intellectual rigidity cannot discern what seems to be blindingly clear to Fosforos, namely that Stalinist Russia and Maoist China were capitalist.

      1. fosforos, your analogiy is matchlessly unenlightening in implying exactly the opposite of my point about the global limits of capitalist development. Under A. Hitler, Germany was already fully developed capitalistically, but lacking colonies. It took WW2, the permitted genocidal invasion of “Chinese stalinist” Russia, and Germany’s managed incorporation into the new global order for A. Hitler’s colonial ambitions in Eastern Europe to be somewhat, problematically realized. See the fascist ring around Russia, which, despite Putin’s suits, will not be permitted be fully developed capitalistically, even if opera buffa oligarchy advances into opera buffo fascism.

    2. “So. So now you write “So Xi, autocratic leader of a one party state directed and controlled economy, became the darling of Davos.””

      fosforos17, I believe Roberts was being sarcastic.

      1. If MR was being sarcastic maybe it reflect an understanding that the “capitalist roaders” in the leadership of China, in order to retain power, needs to expand capitalistically, but the US and its 6th fleet (representing the global capitalist order) can’t and won’t let it…See Samir Amin on this point.

      2. The Deutsches Volk,, in order to become Great Again, needed and more than ever needs to expand capitalistically, but the British Empire and its Royal Navy fleet (representing the global capitalist order) wouldn’t and still won’t let it…See A. Hitler (c. 1925) on this point.

      3. He was not being sarcastic VirginTK, he does believe China is socialist. He is a good marxist economist, but he is not good at all in overall theory, specially marxist leninist.

  2. Michael, could you please offer us your take on the following interpretations of Marx’s work:

    Massimo De Angelis’ take on Marx’s value theory in his “The Beginning of History: Value Struggles and Global Capital”:

    Click to access Beginning%20of%20History.pdf

    Harry Cleaver’s book “Reading Capital Politically”:


    His new book on value theory “Rupturing the Dialectic: The Struggle against Work, Money, and Financialization”:

    Click to access Rupturing-the-Dialectic-final.pdf

    As well as the critique of Marx’s value presented by Jonathan Nitzan and Shimshon Bichler in their “Capital as Power: A Study of Order and Creorder”:

    Click to access 20090522_nb_casp_full_indexed.pdf

  3. $280 trillion is total world wealth (net worth) privately held (Credit Suisse Global Wealth Report, 2017). The U.S. Fed’s Flow of Funds reports $96 trillion in private household net worth. In the U.S. wealth has doubled since Jan 2009, from $48 trillion. I think the Davos crowd looks closely at these figures, and they look admiringly at them. 50.1% of wealth now in hands of 1%. Half of humanity lives at less than $5 a day income, states a Pew Research report. Let’s do math: $5 times 365 = $1,825 a year, call it $2,000 a year. Multiply by half of humanity, 3.75 billion humans, equals about $7.5 trillion annual income and consumption for half of humans. They consume all they earn in income. The poorest half consume about 2.7% of total net worth each year, at most. We could support half of humanity for 40 years on the global wealth. It’s also 10% of global income. And it’s also between half and a third of the gain of $16 trillion, the increase in wealth for last year, 2016. I dislike math, but it’s interesting. Davos people do math, or at least arithmetics.

    1. You add, subtract, and divide well. But what do the numbers mean and who are those “Davos people” that look admiringly at the egregious calculation that half of humanity lives on 2.7% of total annual “net worth (whatever that means). You seem to conflate worth with income, and later income and worth with wealth. You even conflate the ex-colonial nations where household incomes of $5 a day (and less) is common, with the countries of the Davos people, where even among the poorest such conditions do not exist.

      Do you look contemptuously or admiringly at those Davos people?

      1. Yeah, of course inequality is disgusting but if we took the wealth off the richest and spread it around what would that do? Would it mean everyone could then afford to buy a new car, a new house and have plentiful food, clothing and shelter?

        If only it were that simple!

        The problem is deeper than the grotesque levels of inequality I am afraid.

        Money is one thing, production for need is something else entirely. Actually money is one thing and production per se is another thing entirely!

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