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Trump sees the United States as just a big capitalist corporation of which he is chief executive. Just as he did when he was the boss in the TV show, the Apprentice, he thinks he is running a business and so can employ and fire people at his whim. He has a board of directors who advise and/or do his bidding (the American oligarchs and former TV presenters). But the institutions of the state are a hindrance. So Congress, courts, state governments etc are to be ignored and/or told to carry out the instructions of the CEO.
Like a good (sic) capitalist, Trump wants to free the US plc from any restraints on making profits. For Trump, the corporation and its shareholders, the sole objective is profits, not the needs of society in general, nor higher wages for the employees of Trump’s corporation. That means no more wasteful expenditure on mitigating global warming and avoiding damage to the environment. The US corporation should just make more profits and not be concerned with such ‘externalities’.
Like the real estate agent he is, Trump thinks the way to boost his corporation’s profits is make deals to take over other corporations or to make agreements on prices and costs to ensure maximum profits for his corporation. Like any big corporation, Trump does not want any competitors to gain market share at his expense. So he wants to increase costs for rival national corporations, like Europe, Canada and China. He is doing this by raising tariffs on their exports. He is also trying to get other less powerful corporations to agree terms on taking more of US corporations’ goods and services (health companies, GMO food etc) in trade agreements (eg the UK). And he aims to increase the US corporation’s investments in profit-making sectors like fossil fuel production (Alaska, fracking, drilling), proprietary technology (Nvidia, AI) and, above all, in real estate (Greenland, Panama, Canada Gaza).
Any corporation wants to pay less taxation on its income and profits, and Trump aims to deliver that for his US corporation. So he and his ‘adviser’ Musk have taken a wrecking ball to government departments, their employees and any spending on public services (even defence) to ‘save money’, so that Trump can cut costs ie reduce taxes on corporate profits and taxes on high-paid super-wealthy individuals who sit on his US corporation board and carry out his executive orders.
But it’s not just taxes and the costs of government that must be dismantled. The US corporation must be freed of ‘petty’ regulations on business activities like: safety rules and working conditions in production; anti-corruption laws and laws against unfair trading measures; consumer protection from scams and theft; and controls on financial speculation and dangerous assets like bitcoin and cryptocurrencies. There should be no restraint on Trump’s US corporation to do what it wants. Deregulation is key to Making America Great Again (MAGA).
Trump has directed that the Department of Justice pause all enforcements under the Foreign Corrupt Practices Act (an anti-bribery and accounting practices legislation intended to maintain integrity in business dealings), for 180 days. Trump aims at eliminating ten regulations for each new regulation issued to “unleash prosperity through deregulation.” He has fired the head of the Consumer Financial Protection Bureau (CFPB) and directed all employees to “cease all supervision and examination activity”. The CFPB was created in the wake of the 2007-08 financial crisis and is tasked with writing and enforcing rules applicable to financial services companies and banks, prioritising consumer protection in lending practices.
Trump wants more speculative tokens, more crypto projects (as launched by his sons) and has started his own memecoin. Newly proposed changes to accounting guidance would make it much easier for banks and asset managers to hold crypto tokens — a move that pulls this highly volatile asset closer to the heart of the financial system.
Yet it’s only two years since the US was on the brink of its most serious set of bank failures since the financial storm of 2008. A clutch of regional banks, some the size of Europe’s larger lenders, hit the skids, including Silicon Valley Bank, whose demise came close to sparking a full-blown crisis. SVB’s crash had several immediate causes. Its bond holdings were crumbling in value as US interest rates pushed higher. With just a few taps on an app, the bank’s spooked and interconnected tech customer base yanked out deposits at an unsustainable pace, leaving multimillionaires crying out for federal assistance. This deregulation is “a huge mistake and will be dangerous”, said Ken Wilcox, who was chief executive of SVB for a decade up to 2011. “Without good banking regulators, banks will run amok,” he told the FT’s sister publication The Banker.
Trump’s deregulation mantra for his US corporation is now being echoed by the EU and UK corporate states. The EU and the UK have already dropped agreed new international capital requirements for banks under Basel III, following the US’s lead. Former ECB chief and Goldman Sachs banker Mario Draghi is now yelling for an end to regulations operated by EU member states, which according to him “are far more damaging for growth than any tariffs the US might impose — and their harmful effects are increasing over time. The EU has allowed regulation to track the most innovative part of services — digital — hindering the growth of European tech firms and preventing the economy from unlocking large productivity gains.”
In the UK, Chancellor (finance minister) Rachel Reeves asked that the financial regulators “tear down regulatory barriers” that hold back economic growth, suggesting that post-financial crash regulation has “gone too far”. The chair of the UK’s regulatory body for commercial trading, the Competition and Markets Authority, has been replaced with the former UK head for Amazon! The head of the UK financial ombudsman has also recently resigned, due to clashes over the government’s pro-business approach. Reeves wants a full audit of Britain’s 130 or so regulators to whether some should be scrapped. Reeves told senior bankers that “for too long, we have regulated for risk rather than growth, and that is why we are working with regulators to understand how reform across the board can kick-start economic growth.” That means de-regulate and risk-taking is the order of the day.
Now the EU’s Green Deal, policies supposedly aimed at decarbonising the economy, are being watered down to compete with Trump’s US corporation. The EU commissioner responsible, Ribera, has already ‘postponed’ an anti-deforestation law for a year. Now she wants to cut the number of small and medium companies affected by existing environmental regulations and reduce reporting requirements, thus saving apparently 20% of the cost of regulation. Brussels has estimated the cost of complying with EU rules at €150bn per year, an amount it wants to slash by €37.5bn by 2029. “What we need to avoid is using the word simplification to mean deregulation,” said Ribera. “I think that simplification may be very fair . . . to see how we can make things easier.” But as Heather Grabbe, senior fellow at economic think-tank Bruegel says, these proposed changes “seem to go far beyond simplification which would make reporting easier, and they seem to be moving away from transparency, which is what investors have been asking”.
As for controlling fossil fuel production, forget it. Karen McKee, head of oil and gas major ExxonMobil’s product solutions business, told the FT that future investments in Europe would depend on regulatory clarity from Brussels. “What we’re really looking for now is action” and for Brussels to strip its “well intended” regulation back and allow industry to innovate, she said. “Competitiveness is the focus right now because it’s simply a crisis. We are achieving decarbonisation in Europe through deindustrialisation,” McKee complained. Apparently, the failure of European capital to invest and grow is all down to regulations on fossil fuel production and hindering corporations from competing.
It seems that all the governments are swallowing Trump’s strategy for his US corporation. You can maximise profits if you remove all restraints and make deals. What Trump, the EU and the UK ignore is that de-regulation has never delivered economic growth and increased prosperity. On the contrary, it has merely increased the risk of chaos and collapse. And that means eventually, it damages profitability.
We only have to remember the ludicrous position taken by Britain’s Labour government before the global financial crash in the early 2000s to adopt what they called ‘light-touch regulation’ of the banks. Ed Balls, then the City Minister (now a talk show host) in his first speech to the City of London said “London’s success has been based on three great strengths – the skills, expertise and flexibility of the workforce; a clear commitment to global, open and competitive markets; and light-touch principle-based regulation.” The then chancellor and soon to be prime minister, Gordon Brown spoke to the bankers and said “Today our system of light-touch and risk-based regulation is regularly cited – alongside the City’s internationalism and the skills of those who work here – as one of our chief attractions. It has provided us with a huge competitive advantage and is regarded as the best in the world.” What happened next and where is Britain now?
Rachel Reeves has learnt nothing from the 2008 crash. In her first Mansion House speech as UK Chancellor last November she echoed the call for deregulation. But as Mariana Mazzucato pointed out, according to the OECD, the UK ranks second as the least regulated country in product regulation and fourth least for employment. And the World Bank continues to rate the UK one of the highest in terms of ‘ease to do business’.
But now it seems, in order to compete with Trump’s US corporation, Europe and the UK must not only engage in a ‘race to the bottom’ over taxes (Reeves refuses to finance public services with a wealth tax or corporate profits tax – on the contrary she wants to cut the latter), Europe and the UK must also engage in a race to the bottom on deregulation. Even the Bank of England’s economists are worried about ‘competitive deregulation’ as it would inevitably increase the risk of a financial meltdown.
Anybody who has read this blog over the years knows that I think regulation over capitalist enterprises does not work, as proven by the global financial crash in 2008, the US regional bank implosion in 2023 and many other examples in finance, business and services. There can be no real effective ‘regulation’ without public ownership controlled by democratic workers organisations. Deregulating may not increase the risk of financial crashes, or more industrial accidents or consumer scams or more corruption – these happen anyway. But it certainly won’t deliver more economic growth and better living standards and public services.
Indeed, that is why Trump’s corporate strategy is set to fail. Increased tariffs on other corporations may give Trump’s US corporation a temporary price advantage but that could soon be eaten away by higher costs for things and services provided by rival national corporations that Trump’s firm still needs and must buy. Accelerating inflation is the risk. And that won’t go down well with the corporation’s employees. Moreover, making deals on trade and real estate or cutting taxes on profits has never led to significant rises in economic growth. That depends on investment in productive sectors. Most of the cuts in taxes will more likely end up in financial speculation by corporations and the super-rich.
If a corporate strategy fails, the CEO normally has to take responsibility and the corporation’s directors and shareholders can turn against the CEO. And if the corporation cannot deliver better wages and conditions for its workers, but only higher inflation and collapsing public services, that could lead to serious problems within the corporation. Watch this space
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