Share, , Google Plus, Pinterest,


The Death Spiral Of Trust In Capitalism

In the US, UK and Ireland Trump, Johnson – and throttled SMEs – threaten a revolution

By Gary McCarthy

Ireland’s consumption collapsed by 20% in the first half of 2020 – the worst in Europe except Spain and the UK. The economy is on its knees and SMEs have only drawn on €180 million of state funding’

All that was missing from the Truman balcony of the White House was the horse. The mad emperor was back. Only a few days previously a seemingly healthy President Trump had hosted a Supreme Court nomination ceremony for Judge Amy Coney Barrett (not a horse) in the gardens below. Historians with a fondness for the Game of Thrones fantasy series may in years to come refer to this Rose Garden event as the ‘Red Wedding’ viral massacre of the Republican leadership. The Covid-19 super-spreading ceremony resulted in the hospitalisation of Trump, the infection of 34 people across the Trump White House staff and the quarantine of most of the top brass in the US military.

Trump instructed the nation to face the Covid-19 virus without fear and witness the “immunity” of their “favourite President”. There was no mention of the now 225,000 deaths caused by the virus, the millions of jobs lost and levels of social unrest not seen since the Vietnam War era. The world’s foremost capitalist empire is burning literally and politically but the Washington DC insanity continues.

Trump wanted a Supreme Court appointment secured before a fiscal support package for the nation’s struggling economy. The traditional Republican and big business voices of ‘responsible capitalism’ and economic liberty for the individual are curiously quiet and in effect enabling an administration swamped by its own corruption, lies and incompetence. US capitalism has reached a crisis where the pandemic is revealing truths which cannot be spun through the Fox News fear factory. The deaths of more than 225,000 people, 25% of the global total, is already adding to the decades-long erosion of trust in US institutions. However, the emergence of a K-shaped economic recovery which destroys the livelihoods of the asset poor and accelerates the wealth build of the asset-own- ing top 1% of the population might be the tip- ping point for trust in capitalism itself.

Income inequality fueled by strong financial markets of recent years has been as pronounced as it was in the 1930s. That’s probably not a great decade with which to resonate.

Worryingly, the situation has worsened with the global pandemic.

According to the Guardian, ten of the richest people in the world boosted their already vast wealth by more than $400bn in the first nine months of the coronavirus pandemic b as their businesses were boosted by lockdowns and financial crises across the globe.

In a related report, the campaign group Americans for Tax Fairness estimated the collective wealth of America’s 651 billionaires has risen by $1.1tn over the same period.

Meanwhile, only 9 million of the 22 million US jobs lost in pandemic shutdown had returned by November 2020. Vast swathes of the US retail, travel and hospitality landscape remain in deep freeze.

Yes, there is recovery in the broader US economy but there is a real danger of capital- ism evolving into K-shaped ‘Kapitalism’ with a subsequent extreme social and political back- lash. The Trump report card will be brutal and lay bare an exercise in mass delusion.

Twenty years of successful capitalism and economic growth has been based on three key drivers: technology, trade, and population/immigration growth. The final one might surprise but the US has added an additional 100 million people to its current population of 330 million in less than 40 years. The current stewards of right-wing capitalism in the Republican party have misty-eyed economic memories of the Reagan years but they depend on facilitating immigration. Trump of course has curtailed it.

Instead, the Trump economic focus is on “clean coal” and automobile factories. Technology, science and climate change are mistrusted. Trade wars and ripped-up international treaties are apparently putting America first but the US monthly trade deficit has just hit a 14-year high. US farmers must be thrilled. Furthermore, the first and second generation immigrant founders of much of the US technology sector are warning of similar unplanned damage being inflicted on the economy if the world’s best minds and ideas can no longer find a home in the United States.

However, the US is not the only capitalist champion trying to convince its citizens to em- bark on a nostalgic economic journey.

Boris Johnson and his Conservative Party don’t even have the benefit of a world-beating technology sector. The recent Covid-19 testing fiasco involving an Excel spread sheet error is a stark reminder of how badly the UK has fallen behind in global technology leadership. The UK has chosen Brexit to “take back control” of trade and immigration on an Elgar sound track of ‘Rule Britannia!’. Sadly, dreams of empire have spawned epic levels of delusion and in- competence. The mad emperor Boris has not yet managed to appoint a horse to sit in Cabinet but there are no shortage of donkeys in his current administration.

The risky and complex departure from the largest trading bloc in the world is in the hands of serial incompetents like Gove, Patel, Williamson and Hancock. Meanwhile, the rest of the world watches aghast as the Brexit clown car hurtles towards economic chaos whose enormity remains unclear. They are not just watching, they are selling UK assets too. The once proud benchmark of UK capitalism, the FTSE 100 index of Britain’s finest, is now boasting a total value which doesn’t even match the value of one technology company, Apple Inc. The Great British Pound now trades with a volatility which would typically be associated with emerging market currencies but the delusion of future trade success continues. Ireland would be tempted to laugh but not this time. The damage of Brexit will have a big economic impact here and the timing is particularly poor as the economy faces its own K-shaped moment and a lockdown which we boast is the most stringent in Europe.

The appearance of institutional tension between NPHET and the Government has split the country evenly in most polls as to whether the economy or public health should be the immediate focus. However, there is another split taking place within the economy itself. The good news is that the Irish economy has been incredibly resilient through the pandemic. Thanks to a heavy weighting in the technology and healthcare sectors, national economic out- put measured by GDP has managed to flatline while the rest of the world endures 5-10% hits to economic activity. However, if you strip out the contribution of the multi-national sector the picture is very worrying.

The ESRI report in early October 2020 highlighted a consumption collapse of 20% in the first half of the year which is the worst among any country in Europe except Spain and the UK. The domestic economy is on its knees and the small and medium-sized business sector (SME) has only drawn on €180 million of state funding via credit guarantees and a fire-fighting domestic banking sector. Compare that to €15 billion given to UK companies in just one support scheme of many. Something is not working in the SME- support initiatives. Soon huge numbers of personnel will not be working. The SME sector employs over one million people in Ireland. Young businesses and the youth are the future but are their voices being heard in Kildare Street?

When Capitalism works for the majority trust is maintained and economic growth is possible. Misguided policies combined with deliberate misrepresentation are dangerous social cocktail when the benefits accrue to only a very small part of a society. A K-shaped outcome for large parts of the populations of the US, UK and Ireland is kapitalism with a ‘k’ but without trust. Then we are in ‘Das Kapital’ teritory.

November 2020