A new neoliberalism?

The size and breadth of Trump’s tariffs came as a shock to me. I never imagined that a U.S. leader would have such a deeply broken view of how trade works, or would willfully inflict such harm on the American people. But I should have known it was possible. I should have studied the historical example of Juan Peron, whose Trump-style policies of protectionism and fiscal profligacy combined to knock Argentina out of the ranks of the rich nations. I should have studied the failure of “import substitution” policies in the 1950s and 1960s. I should have known more about the political context that produced Smoot-Hawley in the U.S.

In the past, left-of-center pundits have often lumped together various forms of right wing ideology. Smith sees important distinctions:

Over the past eight years, I’ve often thought of Reaganite conservatism as the Lord Ruler, keeping a lid on the spirit of right-wing Ruin that was Patrick Buchanan and the John Birch Society. But it also seems likely that free-market ideology, for all its flaws, was keeping a lid on the right’s natural impulse toward Peronism.

To be sure, libertarianism proved inadequate to a number of important 21st-century tasks — preserving U.S. defense manufacturing capacity in the face of Chinese competition, speeding the adoption of green technologies, redistributing the gains from trade and technology, and driving forward technological progress in an age of exploding research costs. And yet who, at this moment, wouldn’t trade Trump’s tariff regime for the libertarian policies of Argentina’s Javier Milei, who has reduced his country’s inflation to manageable levels, while reducing poverty as well?

[Verlan Lewis makes some similar points in contrasting Donald Trump and Charles Koch.]

Back in 2016, I also made a comparison between Trumpism and Peronism, albeit perhaps prematurely:

A fan of the working class would be promoting free market policies, not protectionism and higher minimum wages and massive government spending increases. How’d Argentina’s working class do under Peron?

In his first term, President Trump put the budget on an unsustainable path, and put substantial tariffs on Chinese imports. But neither of these measures were anywhere near significant enough to turn the US into Argentina. Since then, both the fiscal situation and the trade situation have deteriorated even further. Fortunately, investors still have trust in US Treasury securities; although that trust was briefly shaken a few weeks back, before Trump back off on his more extreme tariff proposals. We are still a long way from Peron’s Argentina, but edging a bit in that direction.

Smith is equally critical of left wing economics, again citing a Latin American example:

I’ve seen respected progressives like Joe Stiglitz rush to praise the economic policies of Hugo Chavez, and then fail to apologize after those policies drove Venezuela’s economy into one of the worst catastrophes in modern history.

An article from 2007 gives you an idea of what Smith is referring to:

Despite the high rate of growth, high public spending and increased consumer demand have contributed to inflationary pressures, pushing inflation up to 15.3%, also the highest in Latin America. However, Stiglitz, who won the Nobel Prize for economics in 2001, argued that relatively high inflation isn’t necessarily harmful to the economy.

He added that while Venezuela’s economic growth has largely been driven by high oil prices, unlike other oil producing countries, Venezuela has taken advantage of the boom in world oil prices to implement policies that benefit its citizens and promote economic development. . . .

In his latest book “Making Globalization Work,” Stiglitz argues that left governments such as in Venezuela, “have frequently been castigated and called ‘populist’ because they promote the distribution of benefits of education and health to the poor.” . . .

In terms of economic development Stiglitz argued it was not good for the Central Bank to have “excessive” autonomy. Chavez’s proposed constitutional reforms, if approved in December, will remove the autonomy of the country’s Central Bank. . . .

Stiglitz also criticized the “Washington Consensus” of implementing neo-liberal policies in Latin America, in particular the US free trade agreements with Colombia and other countries, saying they failed to bring benefits to the peoples of those countries.

How does that advice seem today? Check out this tweet:

Those figures do not adjust for changes in the value of the US dollar over time. The US price level is up almost-four fold since 1980, which means that in inflation-adjusted terms Venezuela’s GDP per capita has fallen from roughly $30,000 to $8,000, whereas South Korea’s has risen from roughly $7500 to $56,000. (Those figures are not exact.)

Today, both the Democrats and the Republicans have market-friendly factions. But the two parties differ in one important respect. No single individual dominates the Democrats in anything like the way that Donald Trump dominates the GOP. This means the Democratic Party is somewhat up for grabs, whereas the battle for the soul of the GOP will have to wait until Trump is no longer the head of the party.

In the 1990s, neoliberals dominated both the Democratic and Republican parties. By the late 2010s, they’d been pushed aside in both parties. Can neoliberals make a comeback in either party, or will they remain on the fringes for the foreseeable future?