Wednesday, October 26, 2016

Steve Keen on Trump’s Economics

In this recent interview here:
“2. The Crazy (and not so Crazy) Ideas of Donald Trump,” Debunking Economics – The Podcast, 25 October, 2016.
The virtue signalling about Trump is tiresome, however: Hillary’s warmongering over Syria is far more dangerous than anything Trump has said.

But – at last – there was at least an attempt at some fairness here, with the following admissions:
(1) Trump’s protectionism is a position that the heterodox left can happily agree with, given that free trade ideology is wrong;

(2) a deliberately devalued currency by China is an important part of Chinese mercantilist industrial policy (more on that issue here);

(3) cutting taxes and increasing government spending (which Trump appears to want to do) will be drive the US into deep federal deficits and will be a Keynesian stimulus and good for the economy (and especially when combined with protectionism to bring back manufacturing).
The discussion starts to falter on immigration, however. What is “racist” about Americans wanting a strong national border with Mexico and their laws on illegal immigration enforced? Answer: nothing per se.

The accusation of “racism” is just a regressive left lie.

For various reasons, even Post Keynesians cannot seem to understand that open borders and mass immigration are a major component of neoliberalism.

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  1. Clinton would not answer the question in the last debate: would she shoot down a Russian plane that went into a Syrian no-fly zone?

    I'd like any other commenters to tell me the answer if they were president. If you shoot down Putin's first plane and it doesn't escalate, but he sends a second, do you shoot it down too? How do you prevent this leading to war? Answers such as "it won't come to that" are no answers at all.

    I am shitting myself with fear over this. Clinton may be bluffing about the policy but we cannot take the risk. As of last week, I now want Trump to win. Despite him being an idiot who has asked about using nukes (the 2-man rule means the defence secretary can refuse to allow their use). Even though he wants a giant tax cut foe the rich.

    Survival is more important. This is like the Cuban Missile Crisis. And shots were fired then, but without retaliation, which saved us all.

    1. In her defence, though I'm disgusted by her foreign policy, it's not really a question she could answer on air. If she answered 'yes', then Russia could take that as a sign of animosity. If she said 'no', then any no-fly-zone effectively imposed would be categorically meaningless.

  2. Interesting point heterodox economists mostly not willing to fairly assess whether open borders are good or bad and for whom.
    Apart from Robert Rowthorn I do not know of any one who does. So I ask myself (and LK and other left wing anti open borders people) what did I miss ? Is there some bigger picture I fail to see and which makes open border a genuine good thing or at least a mostly harmless one ?
    I would be glad to read serious pro open borders arguments (there must be some). Just to be sure.
    BTW did someone seriously challenge Rowthorn's findings ?

  3. Keen supported Brexit and was pretty critical of open borders when he discussed it.

    1. I would like a link (not that I doubt you) because the interviews and blog posts I saw had him opposing Brexit but condemning racism and xenophobia in Australia and the EU rather than stating his position on immigration as such.

    2. Yeah, I haven't seen him criticise open borders in the context of the EU. However, in an ABC radio interview, he did criticise the policy of population growth by immigration in Australia, so he doesn't seem to support mass immigration.


    3. Thank you Someone. In the meantime I found this podcast. From 17 mins he discussing migration, only discusses its effects on the destination country when pressed from 18:40.

      Basically he says "population growth can make the economy grow, but not necessarily increase the per capita rate of growth".

      Doesn't say whether he thinks it's been harmful in the EU, except that it led to the Brexit vote. He repeats that arguably it's counterproductive for Australia's population to get any larger.

      The per capita rate of growth is what anti-immigration voters are worried about, of course.

    4. Argh, googled Keen on Trump without bothering to read LK's original post, which *is* that podcast!

  4. I still don't get how he's supposed to bring back manufacturing via tariff-oriented protectionism.

    All the examples of 'successful' protectionism you refer to on this blog are examples of 'infant industry protectionism'. America's industries are not 'infant' industries; they are industries at a very advanced stage of globalized production, even if they are withering.

    Moreover, tariffs won't necessarily change the dollar's status as the world reserve currency, and as long as the dollar is the world reserve currency the US will have an overvalued currency and perennial trade deficits, working against any subsidization of manufacturing.

    I just don't see how tariffs would magically bring back manufacturing given the West's state of development. The only advanced nation to really protect its industrial base--Germany--didn't do it through Trumpian protectionism.

    1. Germany do it through devalued currency which is not much different than tarrifs and subsidies.

      Also america lost its ondustry and its have to reindustralise but in my opinion it would be better done with subsidies.

    2. Daniel, Switzerland and Norway have larger current account surplus relative to GDP than Germany. Do you think they've a "devalued currency"? Have you considered that maybe current account surpluses and deficits are due to factors such as oil for norway, banking for switzerland, better education for germany, and the like?

      Long story short, devaluation can help during emergencies but that's all. It is NOT a magic wand. Don't place too much hope in "Post-Keynesian" mysticism.

    3. Abbie, in addition to your good observations, there is also this: zero real interest rates do make sure that any (realistic) protectionism will yield nothing even assuming it'll be successful at turning the current account into surplus.

  5. LK I think you are being trigger happy here, Keen did not say that closing the border would be "racist" in the podcast. He said Trump "expressed" his anti-immigration in a racist way. Which is true. Calling Mexican immigrants rapists etc "and some are good people" is racist/xenophobic. His comments were bigoted regardless of whether the wall is feasible or whether cutting immigration will help the economy.

    Trump could have proposed a wall without insulting Mexicans. He has limited his appeal and the appeal of controlled immigration, because now people can kid themselves and others that people who want secure borders are just racists, because of Trump.

  6. I have been quite struck this election by a point you make a lot, the neo-liberal obsession with open borders. I really am a bit shocked at the depth of the insistence. Landsburg, whom I much admire and often agree with, thinks it immoral for the American president to favor the well being or interests of Americans over foreigners. He calls the desire to do so a disqualification for the office.