CAIRO – 21 March 2018: Global economics has been closely linked to the economy of the United States for the past century, and more. To understand the impact of Trump’s presidency on the United States and the rest of the world, Egypt Today sat down with leading political economy expert, Professor John Roemer.
Roemer is the Elizabeth S. and A. Varick Professor of Political Science and Economics at Yale University, United Stated. The American expert is also a fellow of the Econometric Society. Previously, he has been a Fellow of the Guggenheim Foundation and the Russell Sage Foundation.
He mainly focuses on political economy, distributive justice, the benefits of socialism and the role of childhood circumstances on inequality of income acquisition. Throughout his years in the field, Roemer has changed his perspective on how socialism should be implemented and what socialism really is multiple times, refining his view to fit it in the ear within which he writes and lives. In that light, Roemer has revises Marxian socialism.
Roemer has been invited to Egypt by Alternative Policy Solutions (APS), a public policy research project at the American University in Cairo. In cooperation with Economic Research Forum, APS held a discussion with Roemer on equal opportunity on Tuesday, March 20.
ET: Over the past few years, we say a move away from globalization and back towards it again. Is this because globalization’s costs are starting to outweigh its returns?
JR: Let me start by pointing out that globalization has not had a negative consequence on the United States’ branch of capitalism. Globalization has probably been a net plus for Americans because it has reduced the prices of goods. To the extent that workers have been put out of work b cheaper laborers from around the world, first of all from the point of view of global justice, this is not actually a bad thing because the people who have gained were so much worse to the people in the United States who lost. Even now, when they are unemployed, they are much better off that some Indian workers and Chinese workers. So, from the point of view of global justice, this replacement is a plus.
Of course, you do not hear politicians saying this, they need to be concerned with the welfare of their citizens. They cannot say that in terms of global justice, there has been an improvement in the world. Now, it is up to the rich countries to protect their workers in this world and to ensure that when their workers are replaced with others, they can still find a place. This can be done through re-training your workers.
The way you protect your workers is not by tariffs, which is what [Donald] Trump wants to do, and limiting trade, it is by re-training your workers and creating strong social security networks to catch people and save them from falling. And the way to do this is through taking away from the gains from the wealthy get from globalization. So, the fact is that multi-national organizations and the super wealthy in the United States have made bandits in globalization. Bandits! The way to deal with that is to tax them heavily and get these taxes to ensure that the workers who are laid off can be protected and also to re-train these workers. We need to raise the quality of the workers so they are more skilled and they take on more skills than the average worker worldwide: this is the way to protect them.
American trade economists almost always say that trade is good because it raises the average income and that is not good enough. Raining the average national income is equivalent to raising the top segments’ income more and not necessarily the bottom. So, this is not enough as a measure at all.
ET: Investing in human development is important. There is an inter-generational cycle whereby the rich stay rich and the poor continues to be poor, often becoming worse off. In a recent paper exploring the role of childhood circumstances on inequality of income acquisition, you argue that, as you phrase it, “all behaviors and accomplishments of children should be considered the consequence of circumstances: that is, an individual should not be held responsible for her choices before an age of consent is reached, in so far as these choices affect her future income.” Given your view and the results illustrated, how is it possible to reach a more equal society in today’s capitalism world?
JR: This leads us to socialism because now you are addressing the how inequalities within countries. The solution, and the purpose of socialism, is to create income distribution much more equal. The countries who have succeeded in doing this are the Northern European countries and the Nordic countries. There have been a number of strategies used to do that, but one of the main strategies is to ensure that there is a very well structured, high intensity educational system to the poor people in order to substitute for the lack of resources from which they suffer. Their parents probably lack a good education themselves and other resources, often leaving them with little resources.
And I think the problem is, as you said, that globalization affects those who are poor most, especially if the unskilled workers are not re-trained. The national policy has to be to spend much more money educating and improving the skills of unskilled workers. This allows you to reach a stage where you have equality of opportunity.
ET: What are the main economic factors behind the rise of the alt-right and the rise of Trump?
JR: There has been a significant contrast between the two periods 1946 to 1980 and 1980 to 2014. During the first period, the advanced capitalism countries and the improvement in globalization was good and the income of the first half rose significantly during that period. But in the period 1980 to 2014 the income of the bottom half of the people in the United States stagnated completely.
In the period 1980-2014, the total income of the U.S. rose by about 60 percent. This is real income. It is not a huge amount but real income rose by more than one percent, which is good. Now, you should ask how much of this growth went to the top one percent and the bottom 50 percent. Thirty-six percent went into the pockets of the top one percent, and one percent went into the pockets of the bottom 50 percent. This is not per annum, this is the total over this 25 year period. So, every family in the top one percent got 1,800 times as much of the growth as the bottom 50 percent. You can imagine what that does to the people’s view of the justice of the economy.
Now, let me compare that to figures from 1946 to 1980. During this period, the top one percent got 1.7 percent of the growth; this is not pure equality but 1.7 percent is less than the next period. The bottom 50 percent grew also.
People say the period 1946 to 1980 as a period of fair sharing and mutual growth, however, the say the period 1980 to 2014 as a terribly unfair period. People in the United States do not know these figures off by heart and some people probably never saw these figures however they look at their own lives and what is on TV. They see these gated communities, the big houses and fancy cars, and they compare it with their lives. They find that their lives has remained fairly the same. In fact, the bottom 20 percent’s real income fell by 25 percent during this period; they got poorer in real terms. This is in the richest country in the world and this kind of inequality is what fueled Trump’s success. They saw that conventional politics was not doing anything for them and so, they turned to him.
They see their children are worse off than they were, and they lash out. They see Trump as their savior because he comes out and says this is not your fault, the rest of the world is fooling the U.S. in trade deals. And so, he appealed to many of the uneducated people in the United States.
ET: Trump makes a very good case for socialism, I believe. With a medical system that is breaking down, the move against supporting dreamers, tax cuts for the rich, is Trump’s brand of capitalism going to lead people to favour socialism again?
JR: I think that Trump’s America First position is all wrong and that protectionism is all wrong. I think he is only trying to appeal to his political base and so he is blaming immigrants and trade for the problems that the U.S. finds itself in. His answers are incorrect and he is doing what he is doing and saying what he is saying for purely political reasons, I believe.
I believe that socialism is going to come to the United States peacefully through democracy, not violence or a revolution. Bringing socialism to a country is a long process, we cannot just take on socialism quickly. It requires re-distribution of the incomes of those at the top of the population. In the United States there are two types of incomes, labor incomes and capital incomes. About 65 percent of incomes in the U.S. is labor incomes and the rest is capital income. Capital income is extremely unfairly distributed in the United States.
To make this change requires dispossessing the wealthy and the capitalists of their ownership over many things. I think this can come through a democratic process and not a violent revolution, but it takes time and it takes convincing people that they should do it. I think socialism would be better for the United States but it will not come about easily.
Under Trump, the U.S. is unlikely to help out the UK in the post-Brexit aftermath, it is expected to focus on the countries that will benefit it economically rather than give back to other countries.
ET: Will there be a shift in economic blocks as a result of Trump and his Administrations’ actions and decisions?
JR: This is very hard to predict; I do not really have a prediction.
My hope is that the Republican Party will lose the mid-term election in 2018 and that the Congress will be controlled by Democrats, which will then make it impossible for Trump to do much.
I mean, he could still bomb North Korea but my view is that, that would be very difficult. There are probably generals who will not cooperate with him if he wants to do that. I actually do not think that the danger of the North Korean war is too big. My hope is that Trump is limited in the U.S.
We also do not know what will come out of the [Robert] Mueller investigation and Trump’s ties with Russia. And it is conceivable that the results will be devastating and that Trump will be impeached. Especially if the Mueller investigation finds a lot of stuff and then the democrats win the mid-term elections and control Congress; in that case, they will impeach him.
As a result of all this, I do not think that international trade will become protectionist. He has not actually done very much. I mean, even the tariffs that he has put on steel are consequential.
I think, I very much think that socialism is the answer for the world but it will take a long time to get there. I think that in the U.S. it will not come through a violent revolution but rather a peaceful process and it will be gradual.
ET: Before the flotation of the pound in 2015, looking at real poverty, 27 percent of Egyptians lived under the poverty line and even those who were outside this 27 percent did not have as much compared with their counterparts in other countries worldwide. After the flotation, the 27 percent have gone up to become 60 percent. Our taxing system has made it so that most taxes are collected from sales taxes. What is your assessment of the situation? What do you believe are the best economic policies for Egypt going forward?
JR: I am not a student of Egypt and so I cannot say that I have any expertise, however, my expression is that there needs to be more competition and much more businesses in Egypt. Right now, business is controlled by a small group of people and the big capitalists are sufficiently powerful and so they make it difficult for other people to enter.
There are all these educated people and they are unemployed because there is very little demand for their skills because businesses are not competitive and there are not as many businesses as there should be.
You have to change the rules and the laws that make it difficult for people to start businesses, there needs to be much more businesses and more competition than there is now. At this point, you need more capitalism, you need competitive capitalism. You need to be able to compete on a global level.