Trump’s rise in context of the profound geo-financial struggle

Conflicts Forum Weekly Comment, 29 January 2016

The Week, an American political magazine, recently asked the question:

“Imagine giving this advice to a Republican presidential candidate: What if you stopped calling yourself a conservative and instead just promised to make America great again?  What if you dropped all this leftover 19th-century piety about the free market and promised to fight the elites who were selling out American jobs? What if you just stopped talking about reforming Medicare and Social Security and instead said that the elites were failing to deliver better health care at a reasonable price? What if, instead of vainly talking about restoring the place of religion in society — something that appeals only to a narrow slice of Middle America — you simply promised to restore the Middle American core — the economic and cultural losers of globalization — to their rightful place in America?”

“That’s pretty much the advice that columnist Samuel Francis gave to Pat Buchanan [a thrice times’ US Presidential candidate] in a 1996 essay, From Household to Nation, in Chronicles magazine … To simplify Francis’ theory: There are a number of Americans who are losers from a process of economic globalization that enriches a transnational global elite. These Middle Americans see jobs disappearing to Asia, and increased competition from immigrants. Most of them feel threatened by cultural liberalism, at least the type that sees Middle Americans as loathsome white bigots. But they are also threatened by conservatives who would take away their Medicare, hand their Social Security earnings to fund-managers in Connecticut, and cut off their unemployment too.”

Samuel Francis, amongst others in the Republican sphere, had been warning that a market neo-liberalism that hugely enriched a globalised, de-nationalised, de-cultured, and technocratic elite – and which used cheap consumables from Asia [plus Wall Street debt] to keep Americans ‘consuming’, whilst at the same time their median wages were falling – would ultimately throw the middle classes into terminal decline. 

The former Presidential candidate, Pat Buchanan recently noted, under the heading, Is the spectre of Trump haunting Davos?: “At the [recent] World Economic Forum in Davos, keynoter Joe Biden warned global elites that the unravelling of the middle class in America and Europe has provided “fertile terrain for reactionary politicians, demagogues peddling xenophobia, anti-immigration, nationalist, isolationist views … Evidence of a nationalist backlash”, said Biden, “may be seen in the third parties arising across Europe, and in the U.S. primaries.” To which, Pat Buchanan tartly responded, “setting aside Joe’s slurs — ‘demagogues, xenophobia’… Who really belongs in the dock here? Who caused this crisis of political legitimacy now gripping the nations of the West?  Was it Donald Trump, who gives voice to the anger of those who believe themselves to have been betrayed? Or the elites who betrayed them?  Can that crowd at Davos not understand that it is despised because it is seen as having subordinated the interests of the nations and people in whose name it presumes to speak, to advance an agenda that serves, first and foremost, its own naked self-interest?” [emphasis added].

Of course Trump is not an intellectual, as was Samuel Francis, though the former clearly is quite canny. But Francis’ basic point is made tellingly by another commentator from the Republican camp, David Frum

“[T]he Center for Immigration Studies released its latest jobs study. CIS, a research organization that tends to favor tight immigration policies, found that even now, almost seven years after the collapse of Lehman Brothers, 1.5 million fewer native-born Americans are working than in November 2007, the peak of the prior economic cycle. Balancing the 1.5 million fewer native-born Americans at work, there are two million more immigrants — legal and illegal — working in the United States today than in November 2007 [mostly part-time or on minimum wages]. All the net new jobs created since November 2007 have gone to immigrants.  Meanwhile, millions of native-born Americans, especially men, have abandoned the job market altogether.”

Many others have noted the similarities between Pat Buchanan’s themes and those of Donald Trump. But standing behind Francis’ hostility towards the neo-liberal and neo-conservative order lies a much more profound twist to American politics. Francis wrote:

The core of [Buchanan’s] message, consists of a rejection of the thinly masked economic determinism … and an affirmation of the primacy of cultural identity, national sovereignty, and national interests over economic goals. Increasingly, his economic nationalism seems to define and drive his whole candidacy, informing even, his cultural conservatism – though the concept of ‘economic’ implicit in his writing and speeches is considerably broader than conventional concepts of either the Left or the Right … The purpose of economic life in Buchanan’s worldview, is not simply to gain material satisfaction but to support families and the social institutions and identities that evolve from families, as the fundamental units of human society and human action.

Thus, his “America First” foreign policy is more than the isolationism preached by the old America First Committee … For Buchanan, ‘America First’ implies not only putting national interests over those of other nations – and [through] abstractions like ‘world leadership’, ‘global harmony’, and the ‘New World Order’; but also in giving priority to the nation over the gratification of individual and subnational interests.

Protectionism [insulating the wages of US workers] … follows from his economic nationalism, reflecting the economic interests and identity of the nation, just as a defense and foreign policy flows from his political nationalism, reflecting the political interests and identity of the nation. So, for that matter, does his support for curtailing, through a five-year moratorium, all immigration, legal as well as illegal.

Buchanan’s nationalism appears to break with the specter of individualism that has haunted American conservative ideology since the 1930s. It is based on the premise that the individual outside social and cultural institutions is an abstraction; and it probably shows Buchanan’s debt to Catholic social theory rather than the atomistic and acquisitive egoism that descends to the libertarian right from John Locke.

In one column, Buchanan supported the ‘humane economy’ espoused by the Catholic Austrian School economist, Wilhelm Ropke. Buchanan was quoted by the NYT [in 1996] as saying: “We have to ask ourselves as conservatives what it is we want to conserve in America: I believe in the market system, but I don’t worship the market system. I don’t worship at the altar of economic efficiency as I believe some so-called conservatives do. To prefer a 100,000-hog confinement, to hundreds of family farms, it seems to me, is not conservatism. I mean, that’s to worship as a supermarket civilization”.

What is the difference between a Buchanan and a Trump? Well, The Week notes, “Buchanan was recently asked about why Trump was having all the success that he did not enjoy, when he is running on so many of the issues Buchanan did 20 years ago. Buchanan said that it was because the returns are in, on the policies he criticized 20 years ago. All of this is true”. That is, the time is ripe now; whereas it was not, 20 years ago. “Trump is, sui generis,” Buchanan notes, “unlike any candidate of recent times. And his success is attributable not only to his stance on issues, but to his persona, his defiance of political correctness, his relish of political combat with all comers, his “damn the torpedoes” charging in frontally where others refuse to tread … Trump is the future of the Republican Party.”

The point here is, that whilst the Trump phenomenon is sending shivers of fear down the spines of European elites (besieged by their own refugee crisis), with anti-immigrant, anti-elite and anti-neoliberal sentiment on the rise everywhere, the Buchanan/Trump message will certainly catch attention, in Russia, and in much of the ‘non-West’. It should be no surprise however, when Trump says flatly that he sees no difficulty in sitting and talking with President Putin, he then receives from the latter, a compliment by return.

When Samuel Francis talks of this strand of US Conservatism being rooted in Roman Catholic social theory, it is not hard to see how Putin, whose own brand of conservatism is drawn from Orthodox social theory, would find common ground – “where one aspect of Orthodox ethos, present today in Russia, is the strong support for a ‘social State’ i.e., a state of social solidarity, where the common good is the highest ideal, and social justice an ideal, supported by most of the people.”  Ditto for Iran, which, in its separate way, also pursues the notion of a ‘social Islamic nation’ and social justice.  What is striking here is the unstated premise that, behind this strand of US conservative thinking, is the desire to return Catholic principles to their place, ahead of markets (as Russia has placed Orthodox principles above market principles).

But more importantly, Russia and China’s (and most of the non-West’s) problem with America precisely lies with America’s and Europe’s neo-liberal and liberal-interventionist elites – and not with type of Catholic conservatism typified by Buchanan – albeit, that visa bans for all Muslims, per se, of course will be taken badly amiss, and be viewed as pure Orientalism.

To make it absolutely clear what is at stake here, a senior Chinese general, in an address to graduating officer cadets at China’s Defence University last year, characterised the main threat facing China as not military, nor geo-political, but rather, America’s financial, imperial hegemony. General Qiao Liang’s main thrust was that: 

“Many economists — financial experts — did not see clearly that the most important events of the 20th century were not World War I, World War II, and the collapse of Soviet Union. The most important event of the 20th century was the August 15, 1971 decoupling of dollar and gold. Since then, humanity saw the emergence of a financial empire, and this financial empire took all of the human race into its financial system.”

The General gave the officer-cadets an account of the birth of American financial hegemony since Bretton Woods (1947), to the birth of the IMF, World Bank and the WTO, and to the petro-dollar agreement with Saudi Arabia.  The system allows America to exert global financial control, General Liang explained: “They issue dollar bonds, and through the issuance of bonds, they get the dollars out of the country to flow back home. But when this outflow goes back to the United States through debt capital, Americans begin to play a new game, printing money with one hand and borrowing with the other. Printing money can make money, and borrowing can also make money, producing money with money. If it is easier to make money through finance than in real economy, then who is willing to sweat doing hard labour in the low-value-added manufacturing and processing of the real economy? After August 15, 1971, Americans gradually abandoned the real economy in favour of the virtual economy, turning [it] into a hollow country. Today’s US GDP has reached $18 trillion, but the real economy contribution to GDP does not exceed $5 trillion—most of the rest is created by the virtual economy”.

The Chinese General then explained to the cadets that the US had used a cycle of cheap dollars to expand into various regions (the history is related in some detail in his speech), only to be followed by a cycle of high dollar exchange rate, which then triggers a crisis in whichever particular regional zone is targeted – after which the US picks up the assets cheaply. The point here that the general is making is that the US is conducting geo-financial warfare – and that now, it is China’s turn to be targeted (again, he explains why America needs a regional crisis with China in some detail).

Why does America depend so heavily on triggering regional crises and the international flows which these crises? General Liang continues:

“Why does the US economy need and so strongly depend on international capital flows? The reason is that after the August 15, 1971 dollar-gold decoupling, the US economy gradually gave up on physical production and left the real economy. Americans consider the real economy— low-end manufacturing, low-value-added industries — as garbage industries or call them “sunset industries,” and gradually transferred them to developing countries, especially to China. Furthermore, aside from the so-called high-tech industries such as IBM, Microsoft, and other companies, America has gradually turned about 70% of jobs to finance and financial services …

American money begets money in this way, and then the money flows abroad, so the cycle of outflow and inflow makes a profit and with this the US becomes a financial empire. [The] United States takes the world financial system into itself. Many people think that after the decline of the British Empire, the colonial history was basically over. In fact, it is not like that, because after the United States became a financial empire, it started using the dollar as a hidden “colonial” expansion: it controlled national economies through dollars, thus making various countries of the world its financial “colonies.” Today we see a lot of sovereign and independent countries, including China, that although sovereign, with their own constitutions and governments, still can’t shed the dollar. In the end, the countries’ wealth will be expressed in dollars and they will have their physical wealth enter the US through exchange and a steady stream of dollars …

Now, the United States has become industrially empty and does not have much of a real economy that can bring large profits to global investors. In this case, the Americans have to open another door, that of the virtual economy … As long as the international financial capital gets into the pond of its markets, it makes money for America’s own money. Then, it uses the money [created] to fleece the world, and now this is the only way Americans can live. Or we call it the American way of life. The approach is that the United States requires the return of a lot of capital to support the daily lives of Americans and the US economy. Those blocking capital returns to the US are the enemy of the United States. We must understand this to think about it clearly.” 

So what are the policy implications for China? First, the General states, China does not want a war with America. It is not in China’s interest, and in any case, China does not follow America’s penchant for going for a ‘knockout’: “China, by contrast, likes blur and softness, and we do not look forward to knocking you out, but want to resolve and understand all your actions. Chinese people like to practice taiji, which is indeed a higher art than boxing”.  Secondly, China does not believe that America is in a position to wage war against China for the next ten years – so China must use that time to prepare, and to put its house in order.

How to prepare? Firstly to internationalise the Remimbi, and secondly, “the ‘One belt, One road’ is by far the best strategy China can put forward. It is a hedge strategy against the eastward move of the US. Some people will question this, believing hedging should be in the same direction—how can you hedge by going in the opposite direction? Right, ‘One belt, One road’ is China’s hedge strategy of turning its back to the US’ eastward shift: You push in one direction; I go in the opposite direction.

Some may question General Liang’s economic analysis – he says himself he is not a financial expert, but is more a geo-strategic expert. Nevertheless, General Liang’s address was delivered at the University of Defense, China’s top military school, where the General is in charge of the education curriculum for the officers. The speech therefore must reflect top-level Chinese thinking, and would have the endorsement of the leaders of the school, and ultimately also of the president of the Military Commission, Mr. Xi Jinping. (Reportedly, the speech was made available with the General’s consent.)

Of course, this notion of a profound geo-financial struggle that may, or may not, end in conflict, is not confined to China.  The same concept is current in Russia (see for example here), as is the shared expectation that America’s financial system contains the seeds of its own eventual demise. 

No wonder that Russia and China’s attention is caught if Trump’s rise signals that the reign of the American and European geo-financial ‘imperialists’ may be waning.