Trumpisms vs Marshal Plan 2.0

trump 6Marshall

Let’s take a few of Donald Trump’s ideas and put a new spin on them.

One, “America has a trade deficit with China of 400 billion dollars a year. If America keeps it up, America will go broke.”

Response: No, not true. According to the father of modern day capitalism, Adam Smith, the country that receives the goods and services grows richer than the country that receives paper notes (greenbacks).

The reason this is true for America is the government has the ability to print new money to pay for the goods and services it receives from China. Our money supply does not shrink as a result.

There is nothing wrong with printing new money and putting it into the money supply, so long as there are new products and services that match the amount of new money being created. Degradation of the currency by way of inflation is averted. Plus, it doesn’t matter where the new goods and services come from.

Two, “China is making all the products. We don’t make anything anymore. We’re becoming dependent on China.”

Response: no, not true.

China assembles products, whose parts come from other countries. For example, according to iPhone expert Sam Costello, iPhones which are shipped from China to America have parts from America (software), specialized chips (Germany), display panels (Japan), etc. These countries get their cut of the price of the phone before it reaches China to be assembled. China receives only about 10% of the total price of the iPhone.

Three, “China has taken jobs away from our workers.”

Response: no, not really.

According to international trade expert Douglas Irwin, at the most, over the past decade, China has probably taken one million jobs from American workers. Ironically, American companies lay off over a million workers a month. Aiding this trend is the implementation of new technology making American companies more efficient, thus driving down costs resulting in higher profits. We have made China the scapegoat on this one. American companies are the real culprits.

These responses to Trumpism seem counter intuitive, nevertheless they are true.

The one inherent weakness in capitalism is that over time it creates winners and losers. Over the last sixteen years, a large segment of America’s middle and lower classes has lost to financiers (investment bankers, mortgage bankers, private equity firms, insurance companies, retail bankers) and corporate executives who consciously manipulated markets and implemented cost saving technology, which tipped the flow of capital away from middle class wage earners toward themselves.

Hence, the 2016 election rests on which candidate can come up with the best new plan to restore America’s greatest strength – its middle class; and in so doing, can ensure, that those who have been left out of the American Dream, can become a member of a restored and robust middle class as quickly as possible.

I recommend we initiate something similar to the Marshall Plan.

What is the Marshall Plan? After Europe was defeated in World War 2, victorious America created a plan to get Britain and Western Europe back on their feet economically. Within ten years, European nations like West Germany became some of the world’s great economic juggernauts.

Through grants, low interest loans, lowering of trade barriers, technical assistance in introducing modern business strategies, and the reconstruction of national infrastructures, the Marshal Plan (named after General George C. Marshall, then Secretary of State) succeeded in lifting war devastated Europe out of economic disaster, and prepared it to become the richest continent in the world, second only to North America.

Trumpism or a new Marshall Plan 2.0?

To get America’s middle class growing again, implementing a new Marshal Plan would be a prudent course of action.