Gerald Epstein is codirector of the Political Economy Research Institute (PERI) and Professor of Economics. He received his Ph.D. in economics from Princeton University. He has published widely on a variety of progressive economic policy issues, especially in the areas of central banking and international finance, and is the editor or co-editor of six volumes.
PAUL JAY: Welcome to The Real News Live. We’re going to be discussing the firing of Steve Bannon, which has now been confirmed by the White House. That is Steve Bannon, the chief, or was chief strategist for President Donald Trump, is now out. Of course there’s various stories about why he’s out, but mostly, at least at this point, it seems triggered by the fact that he gave an interview to a magazine called American Prospect with Bob Kuttner, in which he said many things. The thing that probably got him fired, I guess, is that he apparently undermined President Trump’s North Korea strategy. He said that, “There is no military option of the United States towards North Korea, because North Korea can blow South Korea to pieces and kill tens of thousands of people, so it’s not really possible to make a serious threat against North Korea.” That of course undermines President Trump’s “fire and fury” argument. And Kelly, the new chief of staff, found that completely beyond the pale, as did National Security Adviser McMaster.
At any rate, this is one of the stories, and perhaps is the triggering event today, Friday, Bannon gets fired. But it’s a triggering event. Clearly Bannon’s been losing power in the White House for some time. If one looks at what he said, Bannon, to American Prospect, Bob Kuttner, his main theme was really focusing on the issue of trade war with China. He seemed so happy that in his mind, Kuttner, who’s a liberal, a Democratic Party supporter in one form or another, who had made some statements critical of the Chinese-American trade relationship. Bannon phones him up thinking he has a like-minded ally on the other side and goes on and on about the need for trade war with China.
Let me read to you just what it was that he said. Here’s a quote from that interview with American Prospect. Bannon says: “We’re at economic war with China, it’s all in their literature. They’re not shy about saying what they’re doing. One of us is going to be a hegemon in 25 or 30 years.” In other words, the United States is now the hegemon, but maybe it could be China in 25 or 30 years. He says, “In 25 or 30 years it’s going to be them or we go down this path. On Korea, they’re just tapping us along, it’s just a sideshow.” He goes on further. “To me, the economic war with China is everything and we have to be maniacally focused on that. If we continue to lose it, we’re five years away, 10 years at most, of hitting an inflection point from which we will never be able to recover.”
If you go back to the first quote, “Never recover,” meaning China, in 25 or 30 years will be the new hegemon. Bannon goes on according to Kuttner, “We’re going to run the tables on these guys. We’ve come to the conclusion that they’re in an economic war and they’re crushing us.” There’s all kinds of implications of Bannon being fired, what it means politically in the United States in terms of Trump’s relationship with what they’re calling the alt-right, Breitbart News, and so on. And we should add to this, this break with Bannon raises another question, is this also a break with Robert Mercer, the billionaire that backed Bannon, that we did a whole documentary about. You can look for that.
But we want to focus in this interview less on all the ins and outs of the Bannon firing, which most of the media is talking about, and deal with the substance of that piece with Kuttner, which is the trade war with China. Because whether Bannon’s in or out, it seemed at least based on his election campaign, that this is something Trump is committed to. We’ll see how this plays out. Now joining us to talk about Bannon’s firing and potential trade war with China, and where this leaves Trump is Jerry Epstein. Jerry joins us from Amherst, he’s co-director of the Political Economy Research Institute and Professor of Economics at U-Mass Amherst. Thanks for joining us, Jerry.
GERALD EPSTEIN: Thanks a lot, Paul.
PAUL JAY: First, your initial impression about the firing of Bannon, and then let’s get into this issue of China and trade wars.
GERALD EPSTEIN: Well, of course this seems shocking just in the timing, and it’s not a surprise, Bannon’s been losing power in the White House for a while. He’s in a big battle with what he calls the globalist wing of the Trump administration, that is, the capitalists like Gary Cohen, formerly of Goldman Sachs, and the military neo-conservatives like General McMaster and General Kelly, and more of the kind of free-trade capitalists who are so powerful within both the Trump administration and in congress, and finance of course. There’s been a big battle going along for quite a while, so he was losing out, so it was not a surprise when he came to give that interview, after he gave the interview to American Prospect, that maybe he was just looking to get fired.
PAUL JAY: Yeah, it looks like that, when he didn’t know it was supposedly off the record and so on. I mean, Kuttner makes the point that this guy is a very experienced media broadcast operative. He makes documentary films, he ran Breitbart News, the guy knows what he’s doing around the media and if he wants something to be off the record you say so. So he was looking to get fired. This North Korea thing it seems, in terms of being most provocative, was the most provocative statement to actually directly undermine Trump’s statement.
But let’s get into the China stuff because that’s what, in the phone call with Kuttner, Bannon’s most passionate about, the need for economic war with China, fulfill these promises that Trump’s going to bring jobs back to the United States. I mean, how realistic was that, ever? I always thought it was mostly rhetoric for Trump, because it means he’s going to take on corporate America. This relationship with China didn’t come out of the blue, it came because corporate America wanted it. It was always, I thought, a pipe dream that Trump would stand up to corporate America either on that, or even other kinds of issues. But maybe Bannon was a real believer in this apocalyptic vision, which includes trade war with China.
GERALD EPSTEIN: Well, it’s certainly the case that if you think about our economic relations with China that the big multinational corporations are very thick in their connections with China in terms of importing parts and producing parts, either through contract arrangements or foreign direct investment over in China. It’s all part of their global supply chain, and in many industries corporate America is extremely dependent on their relationships with China. There never was going to be kind of laying on their backs and letting Steve Bannon create this trade war with China unopposed. There are real issues there of course, in our economic relations with China, and the impacts on American workers, and it’s not just with China but China’s a big piece of it. A number of economists have looked at this very carefully, and some MIT economists, David Autor and others, called it the China shock, the China syndrome. There’s been some real damage done by the economic relations with China, but exactly what the alternative is and what’s a progressive alternative is another story.
If you listen to what Bannon is really saying in this interview with Kuttner, he’s worried about American hegemony. I mean, that’s not so different than what the capitalists care about, and the neo-conservatives, and the business people. They want American hegemony too. That’s not the basis of a progressive alternative that supports American workers.
PAUL JAY: Yeah, this seems to be a very different strategy of how to achieve continued hegemony. I mean, America has a great deal of hegemony now, but there’s no question that China’s getting stronger both economically and militarily. I think it’s greatly exaggerated, especially on the military front. I mean, the American military is larger than China, Russia, Europe, and most of the rest of the world put together. But 25, 30 years out, given the building of growth in China, one can see it certainly becomes a far more competitive economy. But on the other hand, a lot of Chinese growth is based on integration with the United States. How does this balance the rivalry and the codependency?
GERALD EPSTEIN: Well, that’s a great question. I mean, I think it’s clear that American business, they’re pushing an agenda that really helps them, and they could of course care less about generating more jobs for American workers. For example, if you look at the first thing that they’re starting to negotiate now with China, it’s about trademarks, and patents, and so forth. Whether they get their fat shares-
PAUL JAY: Many of whom Trump’s daughter quickly received a bunch of trademarks and patents that have been held up for quite a while.
GERALD EPSTEIN: There’s that too, the old crony capitalism is certainly at play here. This isn’t going to help American workers. Finance wants more ability to enter into China unrestricted, that’s not going to help American workers. Clearly the kind of trade agenda that’s being pursued, and Bannon was not opposed to this form of a trade agenda with China, it’s not really going to do much for American workers. If you really started talking about something serious, about reducing the tax incentives that American business has to invest abroad, imposing some kinds of floors on wages and social protections that would create a level playing field. All of those kind of things-
PAUL JAY: You mean a floor on wages and protections for workers in China or other countries like that, or environmental standards?
GERALD EPSTEIN: That’s right, those are the kinds of things that sound like they would protect American workers, but so far at least, that’s not what the Trump administration is proposing.
PAUL JAY: For those of you that are just joining us in this live broadcast, Steve Bannon has been fired by the White House, partly triggered, everyone assumes, by an interview he gave to the American Prospect Magazine and journalist academic named Bob Kuttner. In it he said various things including undermining apparently Trump’s position on North Korea. Bannon said there’s no military option for North Korea, which seems an entirely reasonable and obvious statement. I don’t know that anyone, including anyone in North Korea, believed what Trump was saying about fury and fire, I mean, he’s like, trying to threaten nuclear war on North Korea. Everybody knows that’s not happening.
But in the interview, one of the things Bannon was most passionate about was maintaining American hegemony vis-a-vis China, and to the necessary trade war with China. In the interview with Kuttner there’s a section that Kuttner talks about that Bannon’s strategy, according to Kuttner, is to launch a complaint under section 301 of the 1974 trade act, which is against Chinese coercion of technology transfers from American corporations doing business there. Is this a legitimate complaint that the Chinese are saying, “You have to leave some technology on the table after you come and make use of our cheap labor?” Is that a real issue? And if it is, does doing anything about that do anything in terms of these promises for American worker’s jobs and wages?
GERALD EPSTEIN: Yeah, well, I mean, there are issues here and they can cut several different ways. On the one hand, yes, I think it is the case that it is a legitimate complaint by American business to the extent to which China puts up various kinds of protections and requirements on Americans doing business there. And on the other hand, we don’t put up similar kinds of protections here. There’s an asymmetry there that can be problematic. On the other hand, I think many progressives who’ve been talking about trade policy in poor countries for a long time have said, “Look, if you really want to spread the wealth around the globe to those who have less of it, there has to be some kind of ability for domestic governments in poorer countries to get access to American technology. I don’t think the technology issue, per se, is a problem, it’s the asymmetry in it.
What do American workers on this side get from that kind of coercion by the Chinese? I think that is a legitimate issue. And there are various other kinds of legitimate issues in our relations with China. They do put up various kinds of trade barriers that perhaps do keep out some American exports, and they do subsidize exports to the United States in various ways that might put American workers at risk. There’s no question that there are issues here, and whether Bannon’s former boss and his allies in government are going to do anything about it, I’m very skeptical.
PAUL JAY: Well, part of it, then, raise the questions that people on the left that are opposed to free trade and critique many of the free trade agreements, there’s been some talk in some circles that there’s sort of a potential left/right alliance on some of these issues. What do you make of that?
GERALD EPSTEIN: Well, Bannon himself, when he talked to Kuttner, said he’s reaching out to Bob Kuttner, who runs this liberal magazine, American Prospect, he’s also a professor at Brandeis, they’re looking for a left/right alliance. I think the idea makes some sense if you think of Bannon and Trump having talked about unfair trade practices, the hollowing out of the working class and the forgotten American worker, the need for infrastructure, the need for fair trade agreements. I mean, these are all things that people on the left and progressives have been talking about for years. On the face of it it seems like, “Well, we’re talking some of the same language, there ought to be some kind of common ground.”
But if you look at, for example, the infrastructure deal that Trump has been promoting and at the press conference on Tuesday when he said all this horrible stuff about the alt-right and Nazis and so forth. If you look at the infrastructure deal they’re putting out, it was just a deregulation of policy to try to make it easier for real estate developers like Trump to skirt environmental and labor laws. Trade policy that they’re likely to put forward, thought it might sound good, like it’s getting at some of the problems with China, is very likely to just be the policies that the corporate interests write. I think this idea of a left/right coalition, even on its own terms, is bound to fail because that’s not the interest of any of the people in the Trump administration.
PAUL JAY: Well, he surrounded himself with billionaires, and multi-millionaires, and Wall Street characters. These are not the kinds of people who are interested in anything that’s particularly good for American workers. I mean, there’s a fundamental contradiction here, which is kind of an obvious one, I mean, if wages go up and unemployment goes down, which these two things are connected to each other, if there are more jobs in the United States wages are going to go up. This is not in the interest of corporate American for wages to go up, although one would think it should be because it would increase demand in the United States, but this is not the way these people think.
GERALD EPSTEIN: And so many of these corporations are global now, so American demand for their products is, for many of them, not all of them, is a small drop in the bucket. They have a more global view of these things. Richard Trumpka, the president of the AFL-CIO, who had been on this manufacturing council where everybody was resigning, he wrote in the New York Times why he resigned and he said that he figured out after trying it out that there was just no way that the Trump administration was really going to be serious on any of these issues of doing what’s in the real interest of American workers.
PAUL JAY: For people watching live, we will be taking some questions if you want to send them in. We’re live at TheRealNews.com, we’re live on Facebook, we’re live on YouTube, I think we’re live on Periscope too, so we’re live on a bunch of platforms here and if you want to send in questions over the next few minutes we can take one. We do have one question here, this is from Sam on Facebook. “Would an American/Chinese trade war result in an increase in chipset prices since they are one of the only American products … ?” That doesn’t quite read right, but anyway.
Yeah, a ton of American computerization is based on production in China and of course it goes the other way, a ton of Chinese products, or Chinese made products at least under license or direct control of American companies needs the American market. But let’s go back to this issue of trade war. I mean, Bannon’s yelling about trade war, certainly Trump did during his election campaign. He hasn’t been yelling about it since he’s been President. How real is this and what do you make of the claims that China’s already waging a trade war against the United States?
GERALD EPSTEIN: Well, this is a rhetorical phrase, right? Trade, war, so how about talk about pretty intensive trade competition that is being waged on both sides. And yes, as I said before, the Chinese government has engaged in various kinds of actions, subsidies, various kinds of non-tariff barriers, and so forth, which have been … Earlier they were doing exchange rate manipulation, they’re not doing that so much now. All of these things were designed to make Chinese exports more competitive. Now, a lot of these exports were really US firms assembling things there and exporting them out, so it wasn’t all for Chinese capitalists by any means. But yeah, the Chinese have been very effective, very clever at manipulating the trading system to their benefit, and let’s be clear, a lot of Chinese have been pulled out of poverty by the economic growth in China, part of which has been promoted by these kinds of activities.
The United States has not tried to protect US workers and manage the situation so it would benefit US workers. What the United States has done in its negotiations with China over the last several decades, and this is under the Democratic and Republican administrations, is look out for the interests of American big business and finance. They’ve been trying to batter down the Chinese walls to get them to open up to American finance, banks, and investment banks. They’ve been trying to enforce these trademarks and these patents. That’s not going to help American workers. So yes, there’s a real issue here. The Chinese have engaged in activity to make themselves more competitive, and the United States has not responded by trying to protect American workers.
PAUL JAY: Well, how could they? Or what do you think they should be doing to protect American workers?
GERALD EPSTEIN: Well, I think they should be going after subsidies on exports that undermine production that’s important here in the United States. They should’ve earlier, and if it ever happens again, oppose various kinds of currency manipulations. There may be areas where there is dumping of products going on, steel and other industries. The United States should make sure that the trade rules are enforced. They should change the tax system so it doesn’t subsidize American corporations going abroad and producing in China and elsewhere. And they should have domestic policies to make it easier for unions here to organize, to invest in infrastructure that helps create jobs here in the United States. There’s a whole list of things.
PAUL JAY: I’ll just go revisit. Just to end up, let’s revisit the point we made earlier. There’s two ways you can deal with the issues of China’s trade. One is what will serve the interest of American workers? Then the other is, and to go back to this quote from Steve Bannon, I read it early on and some of the people that joined just recently may not have heard it. This is a quote that Kuttner, in American Prospect Magazine, quotes Steve Bannon on the telephone call saying the following. “We’re at economic war with China, it’s all in their literature. They’re not shy about saying what they’re doing. One of us is going to be a hegemon in 25 or 30 years, and it’s going to be them, or it’s going to be we.” The rest of the grammar is a little weird, but what he’s saying is essentially in 25 or 30 years either we’re going to continue being the hegemon or it’s going to be China. When you start talking about trade war with China, if your objective is to remain a hegemon and weaken China’s growth, that’s a very different agenda than what’s good for American workers.
GERALD EPSTEIN: Exactly.
PAUL JAY: Or is it? Is being the hegemon good for American workers?
GERALD EPSTEIN: No, being a hegemon is not good for American workers. Even if it were possible, but it’s not possible anymore, let’s face it, Asia is rising, Asia is developing very rapidly. Wages are lower in Asia, technology is catching up. The period of American “hegemony” was a very special time in world political economy, it was after the second World War, all the other capitalist countries had been devastated. There was a group of other countries that were communist and were not participating in the global economy in this way. The hegemony of America, which had may problems, both for America and for the rest of the world, nonetheless was a very temporary thing.
The problem has been that rather than trying to manage the rise of other countries and the relative decline of the United States in terms of its size, and make it so that it operates in the interest of people living in America, workers and others, the whole goal of American governments in the last 30 or 40 years has been to try to manage it so that they remain a hegemon and they try to promote American business. Look, there’s no way the United States is going to be able to maintain this kind of hegemony, and it’s not in the interest of America to do so.
PAUL JAY: And with Bannon out, does this change anything in terms of Trump administration economic global policy?
GERALD EPSTEIN: It’s hard to say, it’s too early to tell, but the policies that are still left, you have Gary Cohen who’s promoting this really, “Take no prisoners, pro-Wall Street, anti-regulation policy,” you have McMaster and Kelly who are Army Generals who are promoting American military hegemony. You might have less explicit alignment with the neo-Nazis and racists, that’s not clear yet. And you probably will have less explicit tariffs and other kinds of protectionist activities. But I think the basic thrust of the policy, which is to promote American business, undercut unions, undercut anything public that can stand in the way of this pro-business agenda, I think that’s going to continue.
PAUL JAY: All right, well, thanks very much for joining us Jerry, and thank you all for watching The Real News Live. Of course you’ll be able to watch this full interview later on all the various platforms, but especially at RealNews.com. At 2:30 Eastern, which is in about 20 minutes, we’ll be going live again with Max Blumenthal, and we’ll be talking further about the White House and Donald Trump firing Steve Bannon, so please join us then on The Real News Network Live.