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US Elections – Europe – World: What will the domino effect look like? (Excerpt GEAB November 2016)

Donald Trump’s victory in the US presidential election creates the conditions for change, but it is not change yet, contrary to what the media and populists believe.

Far from being a “revolution”, the Trump’s advent at the head of the Western system corresponds to a radicalisation of the ex-ante situation. In reality, Trump is the symptom of a Western system which has failed to adapt[1] and is now trying to rule through pure violent rhetoric, by targeting citizens and nations who propose politico-economic counter-models. The method will therefore change, but the objectives and the main principles will not.

Typically, for some months already, many articles have started analysing the vote for Trump as the reactionary vote of a white America which statistically sees its end coming (today, 61% of the American population is white, but this share of the population is expected to turn into a minority within a generation’s time). Similarly, we believe that Donald Trump’s so-called Keynesian stance, in fact promises an outburst of neoliberal principles (deregulation, QE, financialisation, etc …). On all fronts, with the exception perhaps of foreign relations, Trump means the perpetuation of the former system’s actors and methods through the use of authoritarianism and lies.

More positively, Trump brings us closer to a real exit from the world before that he embodies and reveals. Trump will pull away the veil from America[2] thus opening the door to its reinvention.

The GEAB, LEAP’s confidential letter is a monthly bulletin available under subscription. Its contents are not made available to the public until three months later. We offer you the access to this exclusive article from November’s bulletin (GEAB n°109). If you want to read our articles in real time, subscribe to the GEAB!

The limits of political anticipation when predicting the consequences of Trump’s victory

Donald Trump ran a typically populist campaign, promising anything and everything, reacting emotionally to all the attacks against him, a campaign moreover caricatured and distorted by the media. Thus the greatest vagueness reigns as regards to his programme and character. Not only we do not clearly know who he is or what he wants, but there are also many question marks about what he is really able to do. It is not because he speaks strong that he is strong … It is most probably the opposite of that. As we said last March in our bulletin, “One can also speculate that Washington’s financial and military interests will change direction and form an alliance with Trump, who after all, before being a revolutionary, is first and foremost a pro-militarist billionaire with huge potential of convergence with their own interests. Thus, they could lead the media into a project of trivializing Trump and building on the US electoral system complexity, in order to reach their objectives”. This analysis, now validated, indicates that Trump will only do what the establishment wants him to do.

 

graph 1

Figure 1 – Trump’s detailed wealth. Source : Fortune

Whilst anticipating in detail what the future will bring us remains a challenge at this stage, some broad lines appear more clearly. The fact is that, for several months now, the US election, and the two very different scenarios towards which the result was going to send the world, have blocked the horizon of political anticipation. Some trees are still obstructing the view, but at least we are now on the other side of the mountain. Here is the landscape which our team is now able to guess.

Bankruptcy of the american democratic system

First, we wish to clear the American people of the responsibility for the outcome of this vote. We have often said it: 58% of the US electorate considered the hypothesis of a Trump victory as catastrophic, but 52% thought the same thing of Clinton’s. When the democratic mechanism, supposedly rooted in a nation of 320 million citizens, manages to select two bad candidates, it is the system’s fault, not the people’s. Of course, the people get the leaders they deserve; but this is mostly true within the framework of a healthy democracy. When the mechanisms of democracy seize up, being a “good” citizen is no longer enough.

The reality is that at no stage can one consider that the Americans chose Trump… or Clinton for that matter:

. The complex and dishonest game of the primaries resulted in the appointment of two unpopular candidates (i.e. not corresponding to the will of the majority of American citizens)

. The presidential election validated the one candidate who received the fewest votes (Clinton garnered 400,000 votes more than Trump as part of the “popular vote”, which is the only truly democratic vote : one person – one vote, a principle whose derailing induced by the famous “electoral college” has now appeared clearly to US citizens).

. All this within a turnover just over half of the electorate (only 54.2% participated in the election this year). This is the lowest turnover in the past 20 years, with a large disaffection in the democratic camp. This phenomenon is not new but it is growing, despite the importance of the stakes[3].

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Figure 2 – Voter turnout, other countries. Source: Statista

As we predicted throughout this year, the US presidential election of 2016 revealed a vast dysfunction of the democratic system which unfortunately might only be solved once it is halted and subsequently reconfigured. The “good news” is that the high-level of decay within American democracy is now a proven fact.

Populist dominos in Europe

As we said, let us be careful not to judge the Americans for the result of this vote. Especially since identical tests await the Europeans who, in the coming months, will face flawed choices as well. We certainly are not the only ones to anticipate that the Europeans are likely to not raise the bar higher than the Americans just did. On the contrary, Donald Trump’s victory allows us to anticipate a real tidal wave of populist victories in the countries at the heart of the EU (Italy, Austria, the Netherlands, Germany, France[4]). Unfortunately, this anticipation is not saying something new, but what instincts feel; our team argues as follows:

. There is of course the precedent provided by the latest British and American populist victories, which broke the powerful protective dikes we’d had against such scenarios since 1945. These dikes are now lying smashed in the two most emblematic countries of the victory against Nazism[5]. The term “tidal wave” is not used here in vain.

. There is also the feeling of increasing insecurity and uncertainty brought by Trump’s victory in the minds of the world’s citizens in general and of the Europeans in particular. The more people are afraid, the more they look for “strong men” to reassure them. Moments of great geopolitical tension are never favourable to democratic developments; our team is the first to constantly remind that the Putin of a vilified Russia or the Erdogan of an encompassed Turkey have no chance to evolve in the “right” direction from the point of view of democratic values. The Europeans also are afraid of what is happening at home and around them, and Trump’s advent is going to reinforce this anxiety, thus automatically increasing the likelihood of victories of similar characters in their home country.

But our team has identified another mechanism that virtually eliminates the possibility to anticipate a democratic resistance in the forthcoming European elections. European political life is composed of two large camps[6]:

- on the one hand, we have the transatlantic-European technocracy. Composed of colourless politicians, eminences grises and shadowy officials, this group is in command of Europe in Brussels and in most European capitals; they are the craftsmen of this undemocratic EU which is now collapsing; their predicate is “no salvation for Europe outside the transatlantic axis”; they invaded the national and European state apparatus since the fall of the Wall in 1989 and more visibly since 2003 in retaliation for the “great treason[7]” of Chirac / Schroeder at the UN ; they believe in NATO, the Euro-Dollar parity, the TTIP and EU-US integrated intelligence systems, among other things.

- on the other hand, there are the nationalist populist forces with a strong pro-Russian tendency. They are anti-European in the name of freedom even if they do not give a damn about democracy; they are classically “identitarian“; they worship strong political figures, especially white and Christian ones; Vladimir Putin has been their favourite, until now.

The technocratic camp, facing the gigantic crisis which affects them, is increasingly tempted by the path of populism, one very useful to calm people down and try to regain control. But the Russian tendency of the populist camp has hitherto prevented them from going very far in their direction. What Trump’s victory changes is that the populists now have on America’s side a model of an attractive strong white and Christian man. The conditions of the convergence between the two camps are therefore gathered: populism, transatlantism, identitarism, Europeanism … are no longer incompatible. The technocrats who energise the system will, at the very least, “let things happen”.

For all these reasons, we are no longer able to anticipate anything other than the European populist tidal wave in 2016-2017. This tide will not consist merely in victories of populist candidates but in the fact that, in one way or another, the populist theses will end up being on all governmental agendas in Brussels and the great European capitals. Look what happened in the UK, where it is not UKIP but UKIP’s agendas which are currently in power….

 

graph 3 

Figure 3 – Opinion polls in Europe on the populist votes, 2010-2016. Source : Business Insider

What about the “Transatlantic Union” project?

Taking into account the political framework described above, what will happen to the great “transatlantic union” project dreamed of by a part of the European technocracy? This project, we should remind you, is also a form of extremization of the ex-ante situation : the growing influence of the United States on the EU since 1989 (fall of the wall) and even more so since 2003 (Franco-German treason of the US), has had to face wide-ranging questioning caused by the crisis of 2008 (the global systemic crisis), resulting in its radicalisation in order to survive, marching forced marches and moving forward through the many shadows offered by the weak democratic machinery of the EU. The methods used in order to have TTIP signed, despite the opposition of the people (secret negotiations, non-public texts, false modifications, detours by other treaties such as CETA[8], etc.), provide a perfect illustration of the situation.

We have already seen that Brexit is bringing some keys to unlock what our team is now calling the “Transatlantic Union” project in replacement of the European Union. Indeed the UK must leave the EU to please its population. But since the UK is unable to survive outside the European Free Trade Area of which it has been one of the main artisans in the last 30 years, it is the TTIP (or its equivalent) which provides an ideal replacement for the United Kingdom to remain economically integrated to the continent.

But if one adds a transatlantic free trade zone, a Euro-dollar monetary parity, a military alliance, a US intelligence grip on their European counterparts (as revealed in 2013 by Edward Snowden and then in 2015 by Merkel’s wiretapping case and the discoveries concerning the cooperation between the BND and the NSA), … the simplest thing is undoubtedly to speak of a “Transatlantic Union (TU)” project, one potentially very unpopular in Europe … and in the United States for that matter.

Regarding the euro-dollar parity, there is a « peg » of the euro on the dollar, as the euro varies now somewhere between ± 4 % within a dollar/euro window rate of 1,10.

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Figure 4 – Euro-dollar exhange rates, February 2015-November 2016. Source : MarketWatch

Regarding the transatlantic strategical alliance reinforcement, a quick look at the following chart is enough:

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Figure 5 – NATO force troops in Europe, 2014. Source: China Daily.

The “Trump effect” on this project consists of various paradoxical injunctions:

On the one hand, Trump announces a protectionist, “America first”, policy likely to entail greater independence for Europe. And indeed Trump wishes to stop TTIP negotiations and make sure that Europeans no longer count on  automatic military assistance from the US in case of external aggression – if they do not pay their normal share to NATO. As for the dollar, he visibly goes for a weak dollar which should logically regain a price independent from that of the euro.

But Trump will soon face the reality of power, and his protectionist project will soon have lead in the wing … especially when it comes to Europe, which he will soon realise how much the two shores are structurally linked and how much “America” ​​in fact needs the EU to remain “first”. As a matter of fact, one of Trump’s first diplomatic interactions was with Theresa May, as part of an evocation of the Reagan-Thatcher rapprochement in the 1980[9].

As far as the TTIP is concerned, it is perhaps more the “negotiation” aspect than the “TTIP” to which he could have put an end…

A weakening of the dollar can go hand in hand with that of the euro in order to maintain parity.

As for NATO, Trump insists on the fact that Europeans must pay for American protection; and as long as a European Common Defence project has not been implemented, we can imagine that the EU will in fact choose to increase its contribution to NATO.

Accordingly, our expert team anticipates three steps in the evolution of the transatlantic project:

. a first step (by the summer of 2017) will be a strong resistance from European political elites, namely those currently working on the reshuffling of the European project via the European Common Defence project, the Fiscal Europe project, etc … led by Hollande, Merkel, Renzi…[10]

. a second step (by 2020 at the latest) will be the risk of these leaders disappearing for the benefit of increasingly populist governments. This will create the conditions for a strong transatlantic rapprochement on the basis of a great ideological community (political identitarism, economic neoliberalism, strategic securitarism); the return of Nigel Farage on the British political stage following Trump’s victory and the vehemence of his demand for a reinforced UK-US cooperation (leaving the EU to jump into the arms of the US is sign of a mental confusion, or huge dishonesty) suggests similar surprises from the populist « sovereign » Europe.

. but the populists are not made to get along for ever, so a third step (as early as 2018-2019 in fact), per our team’s anticipation, would see cracks in this rapprochement as a geopolitical reality will continue to polarise various conflicting camps within this beautiful transatlantic union – which is far too vast to survive for long.

Russia – Middle East: With Trump, the multipolar world becomes official

Our team anticipates that this “Transatlantic Union” will integrate Russia in one way or another.

The Ukrainian crisis is partly the result of a failed attempt to annex Russia to the EU, under EU’s terms, by blowing the Putin-lock. Three years later, a large US-EU-Russia (maybe even CIS) alliance could see the light of day … based on the Putinian political model. What a failure for the EU to have been unable to build its relationship with Russia, based on democratic values ​​and mutual respect, knowing that this was what the latter was waiting for.

It is in the Middle East that this “great transatlantic alliance” will begin to express itself, in a useful way this time, since it will increase the chances of ending the war and defeating Daesh. The American-European forces on one side and the Russian-Iranian ones on the other will be able to converge against a single target this time: the Islamic State. This is the scenario we have been anticipating for months, a scenario which must bring everyone together: Americans and Russians, Saudi Arabians and Iranians, Syrians and Turks, and even Israelis and Arabs … and allow the Middle East to finally know a lull of all tensions and be able to start considering its regional integration, dreamed for by the region, but which it took the Daesh nightmare to trigger. This scenario may seem optimistic, but we assume it.

This scenario was not an option in the case of a Clinton victory, since her intransigence with Russia and Iran was on the contrary going to create a gigantic risk of a direct Russo-American confrontation. Some say that Trump made us avoid a third world war; our team prefers to say that Trump makes us avoid a third world war in the spring of 2017. That said, compared to a Clinton victory, at least the world has gained some time.

If there is an area where Trump represents a real passage to the world-afterwards, it is indeed that of international relations. Last March, an article issued by the Indian think-tank, Gateway House, put us on this track of anticipation: Trump would be much more compatible with the multipolar world than Clinton. But, as we always say, the multipolar world is not a good thing in itself; it is a given fact of the 21st century world that needs to be recognised in order to be organised. However, the multipolar world of the 21st century has many common characteristics with the Europe of the 1930s, which was also multipolar.

Shall we have to go through a new world conflict to create the conditions for the harmonisation of the big global components? Will Trump have the required vision for the United States and the West to play a positive role in the necessary organisation of a “global community” – in need of operating some kind of wealth pooling, like the ECSC did with coal and steel resources after the Second World War? Our team is rather pessimistic on that aspect and considering the economic principles animating the new President-elect Trump.

On the economic front – Inconsistency on all sides

In the economic field, Trump’s failure is the most likely. Knowing that any failure of Trump’s project will lead to his radicalisation, both politically and democratically, geopolitically and strategically.

Let’s not give in to the temptation to believe that managing a country and managing a business requires the same skills, and that the authoritarianism of a businessman is exactly what it takes to redress a country’s economy. This idea, commonly circulated, is definitely false. Managing a company whose only aim is profit, is a lot easier than managing a nation, whose goal is the citizens’ well-being; an objective requiring much more than the ability to generate or capture wealth.

When we have a closer look at the snatches of Trump’s economic programme, only blind faith in the omniscience of businessmen explains the credit given to his ideas which mingle many incompatible things:

. Unfinanced Keynesianism: an infrastructure investment plan of around 500 billion dollars following a new deal model a la Roosevelt, able to bring together everyone through the Keynesian common sense; but a concomitant tax cut which forces us to ask ourselves where will he get the money from in order to implement his infrastructure plan? From the military budget? Certainly not, since the Pentagon would not tolerate it and on the contrary, Trump foresees an increase in defence spending! Or will money come from social spending? Probably a bit, but the amounts acceptable enough to save are not enough to finance 500 billion dollars of infrastructure;

. Social promises made on the basis of lower social expenses: particularly health related ones, but calculations made on the basis of his ACA (Affordable Care Act) reform project of 2010 seem to show that it would cost more (an additional 0.5 billion) while covering fewer people (between 16 million to 25 million people are not covered).

. Deregulation and authoritarianism: in terms of health, one of his ideas is to loosen the legislation which is binding the pharmaceutical laboratories and to reform the Food and Drug Administration in order to lower the production costs of medicines that are so expensive in the United States. But without any regulations it is not clear why pharmaceutical companies would pass on the benefit they would derive from lowering production costs on patients rather than on their shareholders. Also, he relies on generic drugs from India to bring down the price of medication … all this seems rather incompatible with the protectionist policy he advocates.

. Protectionism in a de facto globalised world: the “Great America” folded behind its customs barriers, while the US industrial and services fabric is perhaps among the most globalised one. His protectionism aimed at reviving the economy may be a good thing, but one needs to be able to implement it; globalisation has happened and is not ready to disappear. Further on, this protectionism will mainly consist of preventing Chinese products from flooding an American market now quite incapable of paying for anything else: if the Americans eat Chinese food today, it is because they do not have the means to eat American food[11]. Moreover, if Trump cuts off the supply of Chinese products, why would the Chinese not do the same with those products soon (how soon btw?) to be manufactured by the ‘Great America’?

 graph 6

Figure 6 – Chinese agricultural commodities towards the US. Source : NewSecurityBeat

. Relaunching the internal market without wage rising: Who will initially buy these made in America products if not the Chinese? (especially if US living standards have not started to rise). Ah, yes, the Europeans, it’s true! But only if the Europeans manage to sell their products on the American market… which has not become solvent yet and is not likely to become so because the Americans are working on a low salaries policy.

. Relaunching the real economy through financial virtualisation: to finance the infrastructure plan, let’s simply print dollars! Relaunch this good old Quantitative Easing. It is going to please the finance world as well. And let’s force the banks to finance the infrastructure project… To do so, let’s deregulate the banking system and suppress that poor Franck Dodd Act attacked by the Republicans since its adoption in 2010. But if banks are deregulated, how will they do what needs to be done? Not to mention that deregulation, financialisation and monetary easing are nothing new; they even account for all the problems in the US and the wider world … If those options had worked out, we would have noticed it.

. etc, etc (this drafting of paradoxical injunctions of Trump’s « economic programme » is broadly debated in the article about the Euro’s survival,  later in this issue).

In short, it is better to laugh than cry over the economic “programme” of Donald Trump. It’s a kind of protectionist neoliberalism, or a radicalisation of all the flaws of the system which exploded in 2007, guaranteeing a perpetuation of problems. In fact, this programme mostly consists of old neoliberal recipes which serve Trump and his cast, and will be be administered with an iron fist and a sugar pill to sweeten the deal. It is distressing because of its incoherence and allows, above all, anticipating major retreats:

. Trump has already contradicted himself on the low wages issue.

. on the FED’s low interest rates and a weak dollar policy which it seemed he was counting on, the financial system is already compelling him to withdraw.

. on his Obamacare destruction plan, he already started in July to change his mind

It appears that Trump is not even a « successful businessman ». His victory has the first effect of saving him from bankruptcy. Somehow Trump officially enacts the provincialisation of an America which power tools just fell in the hands of a family, one mostly concerned about its own survival. Economically speaking, we are most probably witnessing the birth of something which our team chose to call the “poroshenkisation” of the American economy, i.e. putting the economy at the service of the empire of the new Trump dynasty and close affiliates (in the same way as Ukrainian airports are used to sell the Roshen chocolates of the Po-Roshen-ko family, JFK will serve to disseminate advertisements on the real estate affairs of the Trump family), which will go hand in hand with a considerable tightening of control of the thus betrayed American population. On a more serious tone, one must read what the Japanese think of the interest conflict of Trump’s economic empire in the framework of his new functions.

The last remark signals a political strengthening indeed, but it also brings forward the hypothesis of an impeachment likely to happen sooner than expected at this stage. Michael Moore and some other people think this is possible.

US-China a risk of confrontation is on the horizon in 2020

This economic “project” will inevitably collide with China, the other world power. Not only is the trade war – in which Trump planned to launch himself against China – likely to degenerate rather quickly, but the modern model of a global economy which China is working on under the G20 and the BRICS (abundantly described in the latest issue of the GEAB) is fundamentally incompatible with the claptrap uttered by Trump and his US businessman arrogance. History is undeniably on the side of the Chinese and the greatest humility would be required to smoothly slide America into the world after. But humility rarely characterises former “number 1″s.

So, what will Europe do in the middle of all this? We have seen that it will soon become compatible with Trump’s America which has just made itself compatible with Putin’s Russia. This rapprochement of the three western components will not lead to a lasting union; at best, it will lead to one-time alliances. The good news is that Europe, even under populist governance, will find itself in a situation of greater balance within its foreign relations between the United States and Russia; a situation more propitious, as we have always said, to its own independence. Meanwhile, the connections set between Russia and China during the “2nd Cold War” (2014-2017) are not about to disappear, although many conflictual subjects could be fanned between these two countries, starting with the question of their common border. If relations remain stable, Russia is in a position to help Europe face the multipolar realities of the world and find its own place in this game. If Europe and Russia manage to maintain these balanced relations between the two world power-poles of the United States and China, the hypothesis of a major world conflict in 2020 will move away.

Yet, there is something which will not move away and that is the need to rebuild a democracy, which became a vain word on November 9, 2016.



[1]     All attempts to regulate and reorganise the eco-financial Western system since 2008 were blocked in 2010. The Frank-Dodd Act and the attacks directed mostly from the Republicans provide the most representative illustration of the failure of the reforming process following the Lehman Brothers affair. Source : LA Times, 13/01/2015

[2]    For a better understanding of our phrase « pulling away the veil from America », we invite our readers to discover the lucid but bitter text written by Omar Kamel entitled “I’m Arab and Many of Us Are Glad That Trump Won ». Source : Medium, 09/11/2016

[3]     According to Michael Moore, the weak mobilisation of American citizens for this election is due to a calculated accessibility of voting offices: « If they live in poor, Black or Hispanic neighbourhoods, they not only have a longer line to wait in, but everything is being done to literally stop them from casting a ballot. ».  Source: Michael Moore

[4]     See our future calendar edited in September.

[5]     It is not by chance that this process happens in these two countries: convinced as they were of being forever the defenders of freedom, they forgot to remain vigilant to their principles. As opposed to Germany which has been constantly reminded its original sin (Hitler) for over 70 years now.

[6]     There is a third camp, the most representative of 21st century democracy, characterised by its youth and innovation. It is the more and more convincing experiences led by the Podemos, Ciudadanos, Syriza, Pirates etc… But we will not consider this camp which, presently, is constantly belittled, marginalised and defeated by the first two groups.

[7]     To prove the understanding that part of America has of Germany’s and France’s refusal to follow the US in Iraq, look at the title of this book by a New York Times journalist: The French betrayal of America, Kenneth Timmerman, 2005

[8]     Our readers know it, the CETA presents the same regulations as the TTIP but, by targeting Canada, it brings out less opposition. As soon as it will get adopted, the technocrats of Brussels and Washington will be able to complain about the anti-US sentiment motivating the opposition to the TTIP. However, from this point of view, the TTIP opponents will have an easier task to assume this « anti-US sentiment » with Trump elected president. But the political toughening on both sides of the Atlantic as a result  of the alliance between technocrats and populists, make us anticipate that the transatlantic free trade agreements will progress fast – but not necessarily for long – starting in the middle of 2017; even if it is probable that they will bare different names …  populisme oblige.

[9] A rapprochement which served strong ideological and strategical objectives of US influence over the EU through the UK.

[10]   The problem is that these projects of European reconstruction do not have the peoples’ support. Worse, they do not even look for the European peoples’ support. But, as we already said, to launch a Fiscal Europe, there are only two methods: either through democracy (a European one, and not a combination of national democracies), or through force (the one made possible by the technocrat-populist alliance).

[11]   U.S. imports of agricultural products from China totalled $4.4 billion in 2015, our 3rd largest supplier of agricultural imports. Leading categories include: processed fruit & vegetables ($1.0 billion), fruit & vegetable juices ($321 million), snack foods ($208 million), fresh vegetables ($178 million), and spices ($159 million). Source : US Trade office

About Marie Hélène

LEAP, Member of WFSF

Franck Biancheri Networks