The liberal elite were happy in their little worlds, the London metropolitan crowd and the Washington Beltway crowd.
They peered out of their ivory tower from time to time and monitored the headline statistics, everything was fine.
The liberal elite were unaware of the working poor. The Washington Ivy League graduates and the London privately educated just don’t mix with these sort of people.
They want an inclusive society, but don’t really want to include themselves in it, they are the liberal elite; sure of their values and relevance; dismissive of those without their degrees and high-flying jobs.
The working poor don’t even show up in the unemployment statistics. The other statistics show all the rewards going to the 1%, and rising exponentially within the 1%.
Suddenly they ask, “BrExit and Trump, how did that happen?” It was out of the blue.
The liberal elite were unaware of the problems that were developing outside their ivory towers.
While the working poor don’t show up in the statistics, but, surprise, surprise, they do vote.
The Conservatives found the working poor after BrExit, together with a new truly conservative leader, who wants the country to work for everyone.
Trump has appealed to those abandoned by the liberal elite. Surprise, surprise, he now runs the country.
He even fights back against selective reporting in the press that is designed to bring him down. The press say, “Surely he can’t now be punching back – it’s our place to punch him. The rules say that he should only defend himself from our blows!”
The liberal elite now peer out of their ivory tower, and feel the pain of their new irrelevance.
Still unaware of the working poor, they say, “BrExit and Trump, how did that happen?”
The liberal elite are not happy in their little worlds, the London metropolitan crowd and the Washington Beltway crowd.
Adapted from Sound of Suburbs
The radical Australian economist, Steven Keen, has somewhat surprisingly “come out” as an opponent of Free Trade, at least as currently practiced.
In an breakthrough interview published in The Epoch Times, Steven Keen explains how Donald Trump could revive American manufacturing. This article is tellingly entitled, “Why Free Trade Doesn’t Work for the Workers.”
Steven Keen argues Ricardo’s (1820) theory is flawed
Keen pointed out that the argument by classical economist David Ricardo (1772–1823) about wine and clothes involved the workers in one industry losing their jobs. Ricardo assumed, as do modern neoclassical economists, that workers in the losing industry can get a job in the winning industry. So it’s assuming full employment, everybody who wants a job gets a job, which is not the real world. And they also assume you can move resources from one industry into another. Certainly, workers can be retrained. While it takes time, it can be done.
Drawing an example from China, Keen noted that China now produces more of everything, and that it is not possible is turning a weaving machine into a steel furnace. And that’s why you have the rust-belt. In the case of China and the United States, the steel plants in the United States won’t become weaving machines; they just turn into rust. So what you have is absolute destruction of physical resources in one country. Or they ship the capital to the place where the low wage workers are, like China or Mexico, and what you get is a class redistribution of income. The workers in the developed country lose, the capitalists in that country gain.
Steven Keen argues that Free Trade gives Capitalists a “Free Kick”
Keen observes that in this scenario, capitalists in the developed country still own the machinery and employ people but in a different country and at lower wages. Then they sell the products back into the American markets at the same prices but at lower costs. So they gain, and the working class has to finance their consumption with increased levels of debt because they don’t have the income anymore. The workers in the developing country also gain, so it’s also a wealth transfer from the developed to the developing country.
Why BrExit “won” & why Trump won
Steven Keen comments that in a democracy you get to the point where the workers have lost so much because of globalization, they get sick and tired of hearing the fairy tale that they won’t suffer and that it’s all for their own good. And they look at their decayed streets and factories and dismal jobs and lower share of income, and they say: “You know what, I’m going to vote against this.” And that’s what we are seeing globally now with Trump and Brexit, this revolt against globalization and financialization. The absolute losers of all of this are the working class of the first world. The winners are the multinational corporations.
Welfare vs Work
After BrExit, the EU and UK could impose complementary tariffs on each other’s exports at a non-discriminatory level, say 10%. EU tariffs, and balancing UK tariffs would help, not hurt, the macro-economics of both.
EU Tariffs in UK Trade
Both the EU and the UK economies are unbalanced. Some parts of these economies are going very well, but other parts are struggling. Trade is the main cause of this imbalance. Reducing trade makes it more likely that a national government could regain control of its own economy.
The continuing pressure to reduce comparative costs means that there is a growing trend for more concentration of manufacturing activity. This results in some parts of the each region booming, but other parts are left destitute. Yet “Cheaper prices for everything” is a mantra, not a complete policy. This is because it results in widespread and irreparable unemployment. It is only half a policy. A complete policy would attempt to balance employment and prices over time. 100 years of unemployment, as happened as a result of the Enclosure Movement, is not acceptable in a democracy, nor is it acceptable to most clear thinking adults.
Agricultural Subsidies cause hurt
The EU is infamous for its agricultural subsidies. These reduce the prices of agricultural goods, but make farmers dependent upon government handouts, and therefore on the tax contributions of other taxpayers. It also is in flagrant breach of the spirit of the WTO rules on trade.
If the UK did not grant its own agricultural producers EU-style subsidies, the UK could help its own farmers by introducing tariffs on all imported agricultural goods from every other nation.
In addition, if the EU continues with their agricultural subsidies, the UK would be entitled to invoke anti-dumping penalties. With that prospect hanging over their heads, the EU may be prepared to consider allowing discriminatory tariffs to be imposed on EU exports of agricultural goods into the UK, over-and-above the tariff on agricultural goods from other nations.
Tariffs are better than Quotas
Quotas can have a place in food production since it is natural objective of every nation to maintain a large measure of self-sufficiency in food for cultural and defence reasons. Yet tariffs are more economically efficient than quotas. This is because they allow the market to establish a close-to-optimal division of labour between economic sectors.
Quotas are not economically efficient. They can result in much higher prices of now-scarce goods, even leading to a doubling of prices. They can also result in super-profits for importers who have a licence to import up to the quota level, since they are now dealing in scarce goods.
Jeremy Corbyn resoundingly won the vote of party members, holding onto parliamentary leadership of the Labour Party.
Most Labour MPs are unhappy with the decision, believing that it will be electoral poison. Some are looking for support via the unions to change the way the parliamentary leader is elected. For them, Corbyn’s re-election was a disaster; for those who like Corbyn’s socialism it was a great victory.
How can a party so fundamentally divided really work. On the one side, British Labour is dominated by members who hate profit and want to socialize everything, led by Jeremy Corbyn. On the other side, most British Labour MPs recognize that we live in a capitalist economy, with this concept being accepted by the majority of voters.
It is time for a new party in the UK that overtly recognizes the role of capitalism in generating new wealth, and also recognizes that only democratic forces will result in this new wealth being more equitably distributed. This is the true central position, and the argument for an “equitable distribution” a basis for a full-throated contest with the Conservatives.
Democratic Capitalism, not socialism, is the way forward for the UK. It is not the “Free Trade Capitalism” of the Conservatives.
The economic model of Democratic Capitalism recognizes that capitalism is the engine for economic development. It will deliver economic benefits that neither socialism (of the Sanders and Corbyn type) nor communism (of the Venezuelan and Cuban type) is able to deliver. Yet the 21st century has shown that capitalism needs controls, exercised via democratic processes, to ensure that it serves everyone, not just those in control of capital.
It is time that we clearly recognized the two most important economic drivers in a modern economy, Democracy and Capitalism, and stopped toying with dysfunctional alternative models, like that one presented by Jeremy Corbyn and supported by a majority of Labour members. It is quite unlikely that Corbyn’s model will be supported by a majority of UK voters, unless Theresa May badly drops the ball (which seems unlikely).