The Scourge of Neoliberalism, Part 2: Trump’s Failing Neoliberal 2.0 Restoration

Photo by John Gomez/


The following is a continuation of the analysis of contemporary U.S. Neoliberalism in practice that was begun in Part 1 in the preceding issue of Z Magazine. In Part 2, the argument is made that U.S. Neoliberal policy experienced a crisis in 2008-09, and the historic weak recovery that occurred thereafter under the Obama regime. The Trump administration should be understood as an effort to restore the Neoliberal offensive in a more virulent, aggressive, “2.0” form.

Once again the four key areas that define Neoliberalism are considered: Fiscal policy, Monetary policy, Industrial policy, and Trade-External policy. And after three years of Trump it has become clear that Trump has restored momentum to Neoliberalism in the U.S., although only partially and in only select policy areas. The Trump restoration to date is thus incomplete.

In areas of Trade-External policy he has clearly failed to date, clearly succeeded in Fiscal-Tax policy, while in still others—such as Monetary policy—a restoration effort is still “in progress.” Looking into the future, material forces that have been developing within U.S. and global capitalism make it increasingly unlikely Trump will be able to succeed in fully restoring U.S. Neoliberal policy momentum such as existed in the 1979-2007 period.

What will follow Trump’s failed restoration is uncertain, but, whatever it is, it is unlikely to conform to the definition or character of Neoliberalism as it has been known up to now. What follows will either be something more radical and aggressive on behalf of capitalist America—at the expense of American capitalism’s domestic and global challengers—or else a return to a more progressive policy regime that will reverse the worst legacies of Neoliberalism.
The following analysis of Trump Neoliberalism is an excerpt from Chapter 8 in The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump, by Dr. Jack Rasmus, published by Clarity Press, January 2020.


Trump’s Reactionary Neoliberalism
Trump’s election and his economic policies that have followed is best understood as a reaction to the Neoliberal policy regime’s failure under Obama to successfully address the economic crisis of 2008-09, both domestically and globally. Furthermore, Trump’s attempt to resurrect Neoliberalism has more in common with the original neoliberal project initiated by Reagan: i.e. in both cases, their economic policies represent an attempt to confront a preceding period of extended stagnation of the U.S. economy. With Reagan, the 1970s economic stagnation and crisis; with Trump, the weakest recovery from recession in the past 50 years that occurred 2008-2016.

It remains to be seen, however, whether Trump can still succeed in resurrecting neoliberal policies by restoring to full effect the following 12 hallmark characteristics of neoliberal economic policy:

significant expansion of U.S. War-Defense spending;
subsidization of investors’ and businesses’ profits via business-investor tax cuts;
shifting of total tax burdens to payroll taxes and other regressive taxes;
reductions in social program and social benefits spending;
restructuring of external trade and currency relationships with U.S. global capitalist competitors, allies and adversaries alike;
expansion of free trade treaties, whether multilateral or bilateral;
long-term, low-dollar exchange rate to maximize profits of U.S. multinational corporations’ offshore operations and competitiveness of U.S. corporate exporters;
continuation of the “twin deficits” solution to enable financing of ever larger U.S. budget deficits and national debt;
continuation of central bank policies ensuring chronic low interest rates via traditional bond buying operations, and/or Quantitative Easing (QE), to subsidize profits of the private banking system and financial markets;
expansion of industry deregulations and privatizations of public goods, services and programs;
destruction of unions and collective bargaining to compress nominal wage and negotiated fringe benefits;
wage compression by means of delay of minimum and protective wage legislation inflation adjustments, by encouragement of growth of contingency labor employment, by offshoring of jobs, by encouraging displacement of labor with capital by automation, and by policies permitting importation of lower paid skilled labor by H1-B and L1-2 visas.

These are the major policy offensives that together have defined the U.S. neoliberal policy regime since 1980. They are policies that in turn have facilitated the induced restructuring of U.S. capitalist economic relations in the Neoliberal era— with both other capitalist economies as well as with U.S. domestic non-capitalist groups and classes. Not least, they are also the policies that brought about the deleterious conditions faced by large masses of working people, which were responsible for Trump’s election victory.

Trump’s Neoliberalism: Successes, Failures, Work Still In Progress
After nearly three years of Trump policy initiatives it is evident that several of the key elements of neoliberal economic policy have been successfully resurrected and restored by Trump after the crisis of neoliberal policy experienced post-2008. These are:

business-investor tax cutting,
defense-war spending escalation,
industry deregulation and privatizations,
labor compensation compression and union destruction.

The restoration of other neoliberal elements is a work still in progress:

the restoration of chronic low interest rates (i.e. central bank monetary policy) and
ensuring a low U.S. dollar valuation (i.e. exchange rate policy).

But still other neoliberal policies thus far have been proving difficult for Trump to restore. These include, in particular:

deep cuts to entitlement and other social program spending,
the restructuring of U.S. trade relationships, and
ensuring the continuation of the “twin deficits” solution required to continue to successfully finance U.S. budget deficits and the U.S. national debt.

Trump’s failure to restore neoliberal policy across all these fronts simultaneously is in part due to the fundamental contradictions between the four dimensions that constitute the Neoliberal policy mix and regime—i.e. fundamental contradictions lie at the heart of the neoliberal policy regime itself.

But Trump’s failure to date is not due only to these fundamental contradictions between Neoliberal policies. It is also due to the resistance, both domestic and foreign, that Trump’s attempted restoration has been generating, both home and abroad. Trump has launched a more aggressive, virulent form of neoliberalism in his effort to continue an ultimately untenable neoliberal policy regime for yet another decade. Hence, it’s a nastier, 2.0 version, introduced in the increasingly desperate effort to overcome the neoliberal contradictions and the resistance to it.

Trump’s failure to date is not due only to these fundamental contradictions between Neoliberal policies. It is also due to the resistance, both domestic and foreign, that Trump’s attempted restoration has been generating. Photo by


Trump Neoliberalism: Restructuring Economic & Social Relations
Trump’s more aggressive, nastier form of Neoliberalism requires not only launching new neoliberal initiatives—like global trade restructuring—but also fundamental structural change in U.S. political-governmental institutions and U.S. political culture. Political change under Neoliberalism is thus necessary in order to achieve more aggressive economic policy objectives.

In other words, just as Neoliberal policy evolution drives economic restructuring, and economic restructuring requires more aggressive Neoliberal policy, so too does Neoliberal policy in turn drive political restructuring in order to address the resistance to its continuation as it becomes more virulent and aggressive.

Late stage neoliberal evolution thus requires a change in the relations within and between formal U.S. government institutions (Congress, Executive, Judiciary), between the electorate and those institutions, within and between traditional political parties, and between new political rules and norms and traditional civil liberties and democratic practices protected by the Bill of Rights. Change in international political institutions is also driven by the effort to extend and expand Neoliberalism. Institutions like the IMF, World Bank, NATO, G7, G20, and national security arrangements among U.S. and its allies, etc., become targets for restructuring by the U.S. as the American empire reacts to its waning influence and power on the global stage.


Has Trump Restored Neoliberalism?
After nearly three years in office, Trump’s restoration of the Neoliberal policy regime is a mixed picture. On the one hand, Business-Investor tax cuts and War-Defense spending fiscal policies have clearly been set back on an accelerating growth course established under George W. Bush. In fact, they are being pursued even more aggressively. The faltering of War-Defense spending under Obama—which was necessary to justify an even greater $1.-$1.5 trillion reduction in social program discretionary spending—has been restored. In addition, Trump’s tax cuts have exceeded in two years what Obama had achieved in eight.

A similar case may be made for Trump’s Industrial Policy as it applies to deregulation and privatization. Other elements of Industrial Policy represent more of a continuation of preceding trends prior to Obama, and an elimination of Obama’s softer approach in some areas of wage, de-unionization, and other industrial policy programs. While Obama slowed—and in some cases rolled back—the privatization of public lands and public goods, Trump has succeeded in reversing those rollbacks. On the other hand, Obama was an advocate of privatizing education through Charter schools and his “No Child Left Behind” program. Nor did he lift a finger to defend the attack on teachers unions and collective bargaining in the public sector. Industrial Policy associated with wage compression and jobs under Trump represents a return, after Obama, to blocking federal and other legislated wage minimums, while reigniting the Neoliberal attack on reducing eligibility for overtime pay. But wage levels for most workers consistently fell under Obama, and under Trump have proved the same, even as the high end of wage earners may have improved under Trump. |

But there are three areas of Neoliberal Policy where Trump restoration has clearly been failing. He has not been able to achieve even token reductions in social program spending and other non-defense discretionary spending. He has clearly been willing to forego those cutbacks in exchange for agreement by Democrats to allow his escalating War-Defense spending. Nor has he been willing to take on a fight to cut mandatory spending programs like social security retirement and Medicare, as yet. Should he win another term in office, however, that attack is almost guaranteed after 2020.

Since Reagan, there has been an inability of U.S. capitalist economy to reconcile rising War-Defense spending with business-investor tax cutting while deepening austerity in social program expenditures.
Photo by Mark Reinstein/

His two highly successful restorations—i.e. War-Defense spending and Business-Investor tax cutting—combined with failure to cut social program-nondefense discretionary spending—has resulted in a rapid rise of $1 trillion dollar annual budget deficits and accelerating U.S. national debt. That, too, must be acknowledged as a failure at Neoliberal restoration.

The two areas of Neoliberal Policy where Trump’s restoration has failed most dramatically, however, are Monetary Policy and External Policy—the latter in particular with regard to trade relations restructuring and ensuring a low dollar exchange rate. Neoliberal Monetary Policy defined as ensuring chronic, long-term, low Federal Reserve interest rates might be called a fight over policy in process. Thus neither Monetary Policy nor External (especially trade) Policy to date represent a restoration of Neoliberalism by Trump by any definition.

The question is whether the contradictions inherent in these various elements of Neoliberal policy will, or even can be, overcome. Some longstanding contradictions within Neoliberal Policy that have been there since the beginning under Reagan still remain: such as the difficulty achieving Neoliberal external/trade policy objectives without undermining Neoliberal fiscal and monetary policy elements; or new contradictions emerging and intensifying—such as the growing contradictions within fiscal policy between deficits and debt financing, on the one hand, and Neoliberal tax cutting and defense spending on the other. Or within Neoliberal monetary policy, in the form of the central bank engineering lower interest rates while still selling Treasuries at an attractive rate yield in order to finance budget deficits. Contradictions within Neoliberal external/trade policy are also growing—such as keeping the dollar exchange rate low while simultaneously raising tariffs, even as the latter slows the global economy and raises demand (and therefore value) of the dollar.

Another longstanding contradiction inherent in Neoliberalism since the beginning, under Reagan, has been the inability of U.S. capitalist economy to reconcile rising War-Defense spending with Business-Investor tax cutting while deepening Austerity in social program expenditures. Domestic resistance has prevented the latter, except for a brief period during the last crisis in 2011-13 under Obama. Neoliberalism’s “alternative solution” to this was to establish the “twin deficits” that would in effect provide the revenues (from borrowing) to cover the deficits created by Neoliberal continued War-Defense escalation and ever greater Business-Investor tax cutting. But this fiscal policy contradiction solution, by means of External policy (running trade deficits and introducing free trade agreements), has spawned a further and perhaps even more serious contradiction: namely, rising global capitalists’ opposition to Trump’s trade wars policy which itself threatens the twin deficits solution to the fiscal policy contradiction.

Thus domestic U.S. popular opposition to austerity in social spending (which will certainly intensify should austerity apply to mandatory social programs like Social Security), on the one hand, and capitalist competitor opposition to Trump Neoliberal trade policy, on the other, together represent a political reflection of the contradictions that exist today within the Neoliberal policy regime and the opposition to which it gives rise. Neoliberalism cannot have it three ways: it can’t have social program austerity amidst escalating War-Defense spending and Business tax cutting. It can’t have its cake and eat it without having a bad bout of deficit-debt indigestion. And its effort to restore U.S. hegemony via External policy (aka trade restructuring) may no longer be possible either. If so, the U.S. twin deficit will be the eventual casualty.

In the 1930s, competitive devaluations by government declaration or fiat played a major role in preventing the global capitalist economy from economic recovery from depression. Today the same is occurring, but through the intermediary of central bank monetary policy.

In the 1930s, competitive devaluations by government declaration or fiat played a major role in preventing the global capitalist economy from economic recovery from depression. Today the same is occurring, but through the intermediary of central bank monetary policy.

Photo of the Great Depression, Hooverville in lower Manhattan. 1932.
By Everett Historical/

Overlaid on all this is the realization that Neoliberal Monetary Policy has run its course and is exacerbating all of the above. Neoliberal low interest rates—so important to U..S multinational corporations’ foreign profits realization and to a low dollar exchange rate—appears increasingly unsustainable. Neoliberal Monetary Policy since the mid-1980s has been in the service of providing low cost money for U.S. business, low dollar valuation for U.S. multinational corps, cheap money for U.S. bankers and borrowers, and a source of annual trillion dollar income redistribution for capitalist investors via stock buybacks and dividend payouts. In short, it has subsidized capital to the tune of trillions of dollars—in the process artificially boosting financial asset markets and speculative profits. In so doing, however, the chronic nearly four decades of cheap money and credit (and therefore the massive debt increase) ultimately engineered by the Federal Reserve and other central banks, has in effect “broken the back” of monetary policy as a force for stimulating the real economy during periods of economic slow growth and recession. The chronic, long-term and artificially low interest rates have had several effects. One is provoking intensified inter-capitalist competition in the form of “competitive devaluations via central bank monetary policy.”

In the 1930s, competitive devaluations by government declaration or fiat played a major role in preventing the global capitalist economy from economic recovery from depression. Today the same is occurring, but through the intermediary of central bank monetary policy. As the U.S. attempts to drive interest rates down, other world economies do the same and more so by central bank rate policies as well. The result is currency instability outside the U.S. and capital flight to the U.S. as other currencies fall. That capital flight’s destination drives up the value of the dollar, and that disrupts U.S. trade restructuring objectives. So the nearly four decades of U.S. central bank massive liquidity injections in the economy, designed to drive down interest rates, actually results in a rising dollar instead of its decline in response to interest rate cuts.

What the foregoing represents is that Neoliberal Monetary Policy increasingly contradicts Neoliberal trade restructuring and low dollar neoliberal policy objectives. Just as contradictions prevent the three objectives of Neoliberal Fiscal Policy, so too is Neoliberal Monetary Policy today serving as a contradiction to Neoliberal trade restructuring. The reflection of this contradiction on a personalities level is Trump’s simultaneous attacks on China president Xi, as the U.S. is thwarted in trade restructuring, and on U.S. Federal Reserve chair Jerome Powell, as he is blocked in the area of driving down interest rates.

The reflection of Neoliberal contradiction on a personalities level is Trump’s simultaneous attacks on China president Xi, as the U.S. is thwarted in trade restructuring, and on U.S. Federal Reserve chair Jerome Powell
By Corona Borealis Studio/


Contradictions of Neoliberalism
At the highest level, Neoliberal Fiscal, External, Industrial, and Monetary Policies are “out of synch.” Or, more accurately, are increasingly in contradiction to one another. Ultimately this combined “grand contradiction” is due to the financial restructuring and globalization of the international capitalist system since the 1980s, as well as the multiple other material forces that have been evolving within global capitalism during its current four-decade Neoliberal phase. In other words, the evolution of the U.S. and global capitalist economy itself is at the heart of the growing contradictions within the Neoliberal policy mix.

This is no different than prior capitalist policy regimes that arose in the early and mid-20th centuries in the U.S. The new policy mix, associated with the prior natural restructuring of capitalism, at first serves to integrate and stabilize that restructuring. But the policy mix eventually comes into contradiction with the real evolution of the capitalist system. Under the new natural restructuring and changes in the system the prior new (now old) policy regime becomes a drag on the continued evolution of the system. It slows its growth. It destabilizes both its real and financial sectors. Capitalist agents—i.e. investors, corporate leaders, politicians and policy makers—come to realize a more structural change must occur in the policy regime as well. Thus the 1907-16 policy regime, new at the time, eventually no longer serves its purpose. It gives way, after a crisis period, to a new and different 1944-53 policy regime. And that too begins to serve its purpose, as it did by the 1970s, to be replaced by the Neoliberal policy regime that followed.

The question today is whether the Neoliberal policy regime has now “run its course.” If not, then perhaps the Trump restoration might be successful. But if Neoliberalism has reached “the end of its rope” (meaning it no longer continues to serve capitalist expansion and interests), then the Trump current attempt to restore Neoliberalism—even in a more aggressive 2.0 version—is doomed to fail.

In the 1970s, a particular evolution of material forces gave rise to, and drove the evolution, the Neoliberal policy regime from roughly 1978 up to the onset of the crisis of 2008-09. Some of the forces that gave rise to Neoliberalism are inherent to the evolution of capitalism itself—i.e. are thus “natural.” Others are due to changes in the character of U.S. capitalism brought about by Neoliberal Policy—i.e. are “induced.” How then might these “old” material forces have changed over the past four decades of Neoliberal policy regime hegemony? What new material forces have already emerged since 2000? Or are about to emerge next decade? What might these various material forces look like in the decade to come? Will they render Neoliberal Policies increasingly contradictory in the 2020s decade ahead, and therefore make Neoliberal policies even more ineffective? And more contradictory? To put it alternatively, will the new emerging material forces result in the continued, and even more fundamental, failure of Trump policies; and any similarly minded successors to Trump attempting to restore the Neoliberal policy regime?

It is becoming increasingly clear that the material forces—whether old, new, and emerging—likely present a challenge that Neoliberalism cannot resolve. That means the new policy mix of the 2020s will be even more aggressive and violent in its implementation and effect than has Trump’s 2.0 failed restoration thus far. Or, whatever replaces Neoliberalism as we have known it, will be fundamentally different, including perhaps more progressive than imagined. Z

(Note: Part 3 in this series, The Scourge of Neoliberalism, will address the material and technological changes that have been developing in recent decades within US and global Capitalism—i.e. forces that constitute a source of contradictions that, next decade, will result in the demise of the Neoliberal policy regime that has dominated U.S. Capitalism since the late 1970s).

Dr. Jack Rasmus is the author of the Scourge of Neoliberalism, published by Clarity Press, January 2020, and other recent books on late US and global capitalism, including Central Bankers at the End of Their Ropes, Systemic Fragility in the Global Economy, Looting Greece: A New Financial Imperialism Emerges, Obama’s Economy: Recovery for the Few, and Epic Recession: Prelude to Global Depression. Dr. Rasmus’ website is, his blog, and his twitter handle is @drjackrasmus.