The Left needs to dump YOU!

Each left-wing movement in Europe has its own intricansies, but almost all of them were born of the Labour movement. After the industrial revolution, poor people, working class rallied together in center-left parties for more rights like paid sick leave, Universal Healthcare, social benefits. Social democratic parties were the party where the masses rallied in hope for a better life. Now the masses couldn’t be more detached from Social democratic parties. In Britain, the Labour Party is just the third most popular party among the working class, in France, the Front National also leads by a wider margin among working class while the socialist party drowns in popularity with this group of people and the same story happens in the Netherlands, Austria and many other countries. Center left parties are, in some cases, more popular among rich people than with poor people. Why this is happening? Very simple: Center left parties were once the party of the poor, unemployed, the factory worker, the uneducated, disaffected the one who was against the establishment. Now Center left parties are the party of the well connected, the rich, the college professor and the corporate lawyer.

Center left parties had once a clear agenda because they were made by working class people and for working class people; they knew clearly what they want and what were their priorities. They knew their struggles and their problems and wanted to solve them. Now, center left parties aren’t made essentially by the same people as before. They are leaded by elitist people who don’t have a clue how life is outside college campus or big cities. For some of these elitist people, going to a disaffected community or a desindustrialized area may be a field trip or a campaign stop but it will be never be their reality, their struggle, their problems, so working class or people in those communtities will never see them as their own representative.

 

18012659_1947625368794495_426899917_o Continue reading “The Left needs to dump YOU!”

The Budget of Fear and Individualism

An overview

Trump’s first budget proposal is out, one of the most expected budgets ever in american history that symbolizes Trump’s campaign motto: “Make America Great Again”. In case people doubt about it he made sure people would really see that on this budget by labeling it as “America First: A budget blueprint to make America great again”. As promised during his whole campaign he will do everything in his capabilities to shift priorities in Washington to make the American society safer, stronger and prosper while making other nations fear his administration. Does this budget represents this?

Yes, the most absorbing fact of this budget proposal is the fact that there will be a $54Bn. increase in the defense department with the goal to buy more jets, warships, and boost the military activity against ISIS. That will also be of the like of the Defense Industry that has ties to the Republican party. To balance the budget this massive increase in defense and military will be offset by a huge decrease across all others departments

Captura de ecrã 2017-03-18, às 15.20.22

(US Gov Departments expenditure, source: Washington post)

As we can clearly, Trump’s administration represents an inversion in what has been American policies in the last 8 years during Obama presidency. Cuts for almost every department except the Defense, the Homeland Security and Veteran Affairs departments. This ultra conservative and anti government intervention is clearly emphasized in this budget, specially when looking at the EPA department that will be the most affected one (in %) according to this administration hardline stance on global warming. Another way to look at this is seeing the decrease of nearly $10.1 Billion at the State Department which goes along the isolationist mindset that is reshaping american politics.

Proposals and a new paradigm in American policy

As we can see in the table above, Trump administration will do several large cuts in some key departments like the State, Labour and Education departments.

Among the major program cuts implemented by Donald Trump we have:

-The elimination of the USDA Water and Wastewater loan and grant program, a reduction of $498 million.

-The reduction or elimination of 20 programs within the Department of Education including Striving Readers, Teacher Quality Partnership and Impact Aid support payment for federal property and international education programs.

-Cuts FEMA state and local grant funding by $667 million, including the Pre-disaster Mitigation Grant Program and Homeland Security Grant Program.

-Eliminates funds for Section 4 Capacity Building for Community Development and Affordable Housing.

-Ceases payments to the United Nations’ climate change programs for the Green Climate Fund and other funds.

-Scales back funding for the World Bank and other international development banks by $650 million over three years.

-Shrinks the Treasury Workforce by an unspecified amount

-Stops funding for the Clean Power Plan.

These measures like the elimination of funds for affordable houses and education show that Trump will do major cuts in several traditional welfare sectors contradicting his electoral promises of giving better living conditions to the American people being not so different of many traditional Republican proposals that refuse the government intervention in these key sectors. Another sector in which this can be seen is in health with the removal of the Patient Protection and Affordable Care Act, known as Obamacare, which will mean that many Americans will become unable to pay health insurance meaning they cannot be assisted if they have an emergency health problem and will also become unable to pay treatment for oncological and chronic illnesses. Despite Trump’s promises that Obamacare will be replaced by something better until now, no concrete proposal was made.

Less surprising is the decrease in funds for Climate, Development and Migration issues. On these subjects Trump presents a populist evolution of the Republican stances by ignoring or in some cases, even denying the existence of some of World’s major problems, in a contrast with a more internationalist and interventionist position taken by the Obama administration.

As it is typical in a nationalist budget proposal this also marks a shift is the balance of the United States policy that will give now less importance to Global Affairs and more importance to Internal Affairs following the concern of many Americans that worry about their living conditions and jobs but not about a war in some Middle East country or a big natural disaster in Asia.

In the limit this could mark the return of an isolationist America. This can appear surprising if we consider the United States policy after the Second World War but in fact if the US was quite isolationist and protectionist during the XIX century and most of the first half of the XX century. However unlike in the XIX century this position is now much more irresponsible because some problems like the Climate Change, Islamic terrorism and the Migration crisis are global and require agreements between the World’s most powerful nations, among which is included the United States, in order to overcome them. There is also a moral imperative because the United States has responsibilities in some of this problems specially in Climate Change and in the instability in the Middle East.

Economic prospect

Above we’ve seen how the budget might be for the next year, but numbers alone don’t mean anything, however if we take into consideration its implications for the american economy now that’s something even more interesting to think and look at.

One of the most famous economists ever, that is still a reference in our days, John Maynard Keynes said that Aggregate demand, in other words, a country GDP is represented by the below equation:

Y= C+G+I+Nx, where Y is the country output (we refer it as GDP most of the times), C is private consumption, G government spending, I is Investment and Nx is Net Exports ( Exports – Imports).

Taking into consideration the proposed budget G will decrease in 2018 due to government slashing some expenditure on social programs, as a consequence many poor families will lose their subsidies which will make them poorer, and since Investment is divided between private and public, we see that it might have a negative variation (seeing for example the Transport Department projected expenditure variation). With this in mind we could already see that, all things remaining constant, American 2018 GDP might degrow a bit, however there is still one thing to take into consideration, which is Net Exports, for that we need to take into consideration the effect of the Interest Rate and Exchange Rate.

Last week, we saw an announcement by FED’s president Janet Yellen stating that FED interest rate will rise from 0,75% to 1%, which has its economic consequences.

fig32

(Exchange Rate, Rate of Return, source:University of Colorado Boulder)

Represented in the image above, we have the vertical line which is the domestic interest rate, the horizontal line the foreign interest rate, the vertical Axis the Exchange Rate level and the horizontal Axis the expected rate of return. We see that an increase in the american interest rate (From left to right) will mean an higher expected rate of return of american investments. This means that the dollar will be more desirable and demanded which will trigger it’s value, that is to say, it’s exchange rate goes up, a dollar now is worth more Euros, Kwanzas, etc.

This interest rate hike and consequently Dollar appreciation might deteriorate American Net Exports, since the dollar is now more expensive and so are the american products.

This combination of raising interest rate while cutting government expenditure can lead to a deceleration of the american economy in 2018.

In the end, we should bear in mind that this is just a budget proposal and needs congress approval to become a reality. Even though it is creating some divisions among republicans this proposal seems a plausible budget and it seems likely to be approved by a congress in which Republicans have the majority of the seats. This is a budget proposal that represents fear, individualism and isolationism focusing on military activity, instead of supporting social, education and healthcare programs that can be a social uplift for many poor families and improve the living conditions of many americans. Sectors like the environment are also ignored by this budget proposal. These measures will not only be negative for the economy because it lacks enough of a stimulus, but will have the likely result of dividing and polarising even more the American society which can create more social unrest special among the poor and minorities.

 

Luís Carvalho, economics student and proud 2015 graduate of democracy

Pedro Diogo, economics graduate

Disclaimer: This Post reflects solely the author’s opinion it does not represent the whole platform

The advance of economic patriotism

The last few days in Europe’s business community have been turbulent. For once it was not about the impact of the new American administration on the European economy, but about acquisitions. Big ones. Where many of us were worried about “America First”, it now seems that in Europe something similar is happening. Not Europe first or Brussels first, but the UK first, the Netherlands first, and Germany first. The developments of last week might prove to be characteristic for the future of Europe’s economy.

The most important news of last week was the failed attempt by American food giant Kraft Heinz to buy its Anglo-Dutch rival Unilever for the price of 143 Billion USD, which would Continue reading “The advance of economic patriotism”

Third Way is Kaput

Third Way

In the 1980s, Neoliberalism dogma was still underway, but according to author Stuart Hall, another movement was being created, it was “New Times”.

The “New Times” that would become one of the causes of the Third Way, consisted in the transition from industrialized economies to tertiary and IT-oriented economies. In addition to economic changes, these “new times” also reflected the decline of the political class, the expansion of people’s individual choices in terms of consumption and lifestyles, as well as the beginning of the debate on the issue of sexuality that began to emerge as a “hot” topic at the time. Continue reading “Third Way is Kaput”

How Neoliberalism Influences Immigration Policies in Modern Western States

In nowadays’ society, governments and political elites are influenced by the neoliberal thought: The influx of public money into banking industry, the collaborations between national governments and private corporations, the divergence of public funds into the private sector, accumulation of capital, and the dominance of corporate sectors, are typical attributes of a neoliberal behaviour1 . Governments often act according to this ideology: They emulate corporations and work according to the market logic of efficiency, competitiveness and profitability.2 Continue reading “How Neoliberalism Influences Immigration Policies in Modern Western States”

2017: A practical guide for the worried voter

The year 2016 has ended, for some a terrible year where we have lost dozens of famous people. From football legend Johan Cruyff to legendary singer Leonard Cohen. People who were not only great in their profession but who also influenced the world around them. Take Olympic champion and anti-war figure Muhammad Ali. A hero and inspiration for many who showed us we should never give up on our dreams despite our social background, religion, or race. Continue reading “2017: A practical guide for the worried voter”

The rage against the Establishment

November the 9th, 6:30 Am

I woke up quite early to hit the gym, I started my daily routine packing up things, had a quick breakfast trying to avoid the inevitable, checking who had won the elections or was predicted to win at that time. It was with no surprise that I saw Trump with 244 electoral votes against 215 from Hillary.

I must admit I wasn’t shocked at all, the night before I went to bed with the feeling the next morning I would wake up with Trump being the winner and that was what happened.

How did a guy accused of sexual assault, who filed for bankruptcy more than once, who proposed to build a wall, bring back waterboarding and torture[i], ban Muslims coming in, with no political experience and all his sexist, homophobic and racist interventions manage to be seen as the most fit for the job at the oval office? Continue reading “The rage against the Establishment”

Why is Europe turning to Far Right?

“A Spectre is haunting Europe – the Spectre of Nationalism”

I’m pretty sure that it wasn’t this way Marx started his famous book “The Communist Manifesto”, in 1848, however I’m pretty sure it reassembles today’s Europe. Now and then we hear about how Far Right parties have become more and more accepted and somehow desired by the people, in some countries they even have become the most voted party on opinion polls, I’m talking of Netherlands for example with Geert Wilders [i], Marine Le Pen in France [ii], the last presidential elections in Austria (which might have a second round)[iii] and ultimately the impact UKIP had on the Brexit vote[iv]. Continue reading “Why is Europe turning to Far Right?”

Is the current ECB monetary policy enough?

The International Financial crisis of 2008 affected deeply almost all the world’s economies. The history was not forgotten because the 1929 crash and subsequent crisis in the following years led to a profound and long depression and deflation with a very high unemployment rate. Governments all over the world had to answer to this catastrophe. The two primary methods to stimulate the economy were the Fiscal Policy and the Monetary Policy. On developed countries the Monetary Policy gave a good portion of that response.  That forced Central Banks all over the world to respond to this crisis. The FED and the Bank of England were quick to react with an aggressive decrease in interest rates and especially in the American case a large program of buying public debt asset titles known as quantitative easing. These measures should be able to stimulate investment (because it’s easier for companies to finance themselves at lower rates) and also the consumption. However the ECB decreased the interest rates sharply but only to 1% and in 2011 and even increased the interest rates a bit to around 1,5%, which increased even more the difficulties of the countries, also affected by the Sovereign Debt Crisis such as Greece, Portugal, Ireland and Italy. One of the reasons for a slow decrease in the interest rates by the ECB is that the objective of the ECB is to guarantee price stability unlike the FED and other central banks of developed countries. The following graph shows that path taken by the ECB interest rates:

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Continue reading “Is the current ECB monetary policy enough?”

Progressive Youth disappoints over Brexit

2d7c08db-9d87-43ce-921f-513acca86f7e-2060x1236Before writing this article, I asked several young Brits if they would prefer an hypothetical undemocratic European Union over a Brexit. Most of my British contacts are high- or middle-class and active in so-called progressive political movements. Pretty much all of them told me that they would prefer staying in an undemocratic European Union.

Continue reading “Progressive Youth disappoints over Brexit”