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THE
AMERICAN
ECONOMY
FROM
ROOSEVELT
TO
TRUMP
VITTORIO VALLI
The American Economy from Roosevelt to Trump
Vittorio Valli
The American
Economy from
Roosevelt to Trump
Vittorio Valli
Department of Economics and Statistics “Cognetti De Martiis”
University of Torino
Torino, Italy
This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
Preface
v
vi Preface
of its economic hegemony. The crisis of the Soviet Union and of the
Soviet bloc in the late 1980s and the beginning of the 1990s seemed to
promise the full achievement of the American aims and to mark the end
of history, with the final prevalence of western liberal democracy.
But history teaches us that history never ends: it has always trends and
cycles, reversals of fortune, sudden upheavals, gradual ascents or decline.
Unregulated globalization and technological changes finally led to a
great backlash. The rapid industrialization and technological catching up
of Japan, South Korea, and then China and other emerging countries
contributed to accelerate the US deindustrialization and indirectly
increase US economic inequalities. We have, moreover, witnessed the
passage of part of Eastern Europe to the EU after the dissolution of the
Soviet Union; the booming expansion of the Chinese economy and, since
1992, that of India; the growing tensions in the Middle East; the attack
on the twin towers on September 11, 2001; the wars in Afghanistan,
Iraq, Syria, and Libya; the advent and semi-defeat of ISIS; the desire for
resurgence of Russia and of emerging powers; the great recession; the
drama of migrants and refugees from Latin America, Middle East, and
Africa; the Brexit, and so on.
The reaction to a part of these events has been the brutal recourse to
arms and wars of the two Bush administrations, the more nuanced, but
undecided, Obama’s international policy and the rough avowal of America
first and of protectionist measures of Trump’s populist policy. All this is
leading towards an imperfect multipolar world, much more difficult and
complex than the asymmetric bi-polarism prevailing in the 1946–1989
years, frozen by the hard equilibrium of cold war and nuclear terror. A
phase of gradual decline of the American economic power had taken its
first steps.
In economic matters, the great recession of the 2007–2010 years has
proved the inner fragility of an economy dominated by banks and multi-
nationals and in which the political decisions are heavily influenced by
the interests of the big finance, the big e-corporations, the multination-
als, and the super-rich.
In the US, President Obama saved the majority of financial institu-
tions and some big industrial corporations and helped the recovery of the
country by stimulus packages. He tried also to put some timid limits to
viii Preface
the unruly action of major financial groups and to extend the health cov-
erage to the majority of the population. Finally, he tried to take some
steps toward a “green” policy, but at the same time, he favored the expan-
sion of fracking techniques in the extraction of oil and gas, which reduced
the US energy dependence but caused severe environmental damage in
vast zones of the territory. Obama’s major domestic failure is due to his
timid reformist and gradualist approach, which could attenuate, but not
arrest, the continuing rise of the great fractures in the US economy and
society: the rapidly increasing divide between the rich, the poor, and the
declining middle class, between races and religions, between immigrants
and natives. These fractures have indeed been the culture medium of
Donald Trump’s populist appeal.
President Trump has announced and then tried to cancel, or reduce,
the effects of Obama’s policies on health and on green policies. He also
proceeded to extend anti-migration walls, to repudiate some multilateral
trade agreements and to raise some tariffs, to try reducing off-shoring and
attract foreign investment. He finally cut taxation, in particular to corpo-
rations and to rich people as himself. His populist policy has helped him
to gain the presidential election, but his controversial personality, full of
haughtiness and of racist and sexist elements, and his intricate links with
the interests of the arm industry, the oil and coal corporations, the con-
struction industry, and big finance, can prelude to even greater social
fractures, to trade wars, and to a dangerous scenery in international rela-
tions and in the social and environmental arenas.
Particular thanks are due to Luigi Oddo, who has skillfully provided the
updating of most figures and tables for the English edition of the
volume.
I finally thank the editors of the publisher Carocci for their important
contribution to the Italian edition of the book and Laura Pacey and Clara
Heathcock of Palgrave Macmillan for their very kind and competent
supervision of the new English edition of the book.
Any errors or omissions are, of course, my complete responsibility.
Contents
xi
xii Contents
10 Obanomics 143
10.1 Obama’s Ideas on Economics 143
10.2 Obama’s Response to the Great Recession 144
10.3 The Industrial and Innovation Policy 151
10.4 Obama and the Environment 152
10.5 Obamacare 156
10.6 Inequality, Taxation, and the Middle-Class Crunch 159
References161
xiv Contents
Statistical Appendix 207
Index 215
List of Figures
xv
List of Tables
xvii
xviii List of Tables
Table 9.2 Real GDP and real per capita GDP in the two US great
crises138
Table 9.3 A comparison between the great depression and the great
recession139
Table 10.1 Annual % rate of change of real GDP in selected areas or
countries: 2007–2017 145
Table 10.2 Harmonized % unemployment rates in selected areas or
countries: 2007–2017 146
Table 10.3 Federal receipts, outlays, deficits, and debt as percent of
GDP: 2007–2019 149
Table 12.1 The US and China: selected indicators 185
Table A1 Population in the US and in the selected countries (million) 207
Table A2 Total GDP in PPP, not adjusted to ICT prices, in the US
and in selected countries (US = 100) 208
Table A3 GDP per-capita in PPP, not adjusted to ICT prices, in the
US and in selected countries (US = 100) 209
Table A4 Macroeconomic indicators in the US and in selected
countries: 1952–2017 210
Table A5 Macroeconomic indicators for the US in the period
1980–2017211
Table A6 Other indicators for the US in the period 1980–2017 212
Table A7 Full-time and part-time employees by industry in the US:
1950–2017213
1
The Birth of a Great Economic Power
change of per capita GDP of the US had in fact been 1.82, while the
world average had been 1.3.3 The last quarter of the nineteenth century
and the first years of the twentieth century saw the formation of the US
economic dominance, which clearly manifested itself in the following
years.
In that period, the perception of such a profound change in the world
economic equilibria was, however, very limited. In those days, there were
no synthetic economic indicators, such as GDP, and it was therefore very
difficult to perceive and correctly assess the importance of world eco-
nomic transformations. Moreover, the great Western European powers,
the UK, France, and Germany had a vast colonial empire, so their eco-
nomic strength was augmented by the important economic and financial
links with their colonies.
There was, moreover, a remarkable ignorance of what was happening
out of their national boundaries or out of their empires even in some of
the prominent political leaders. Education at school was then, as it is
today, strongly nationalistic, and in Europe, euro-centric, but its effects
were not attenuated, as it now happens, by extensive travelling abroad,
the massive diffusion of international media and the widespread use of
internet.
In any case, the colonial empires, though vast and powerful, were
giants with clay feet. They were destined, in the long run, to dissolve, as
it happened in three-four decades after the Second World War. They
were, in fact, undermined by four intrinsic weaknesses.
From the economic point of view, the European empires were substan-
tially based on the principle center-periphery. The rapid growth of indus-
try and of modern tertiary activities, and so a faster economic growth,
was mainly concentrated in the center of the empire, while the periphery
(the colonies) acted mainly as furnishers of raw materials and as a market
for manufactured goods. It follows that there was a very unequal eco-
nomic growth in the center and in the periphery of such empires and
therefore large and growing tensions towards a social and economic
resurgence of colonies.
Within colonial empires, there were, moreover, great ethnic, linguistic,
and religious differences, which in the long-run contributed to under-
mine their existence.
The Birth of a Great Economic Power 3
1.2 T
he Economic Consequences
of the Frontier
After reaching independence, and in particular during the nineteenth
century, the US fully utilized a crucial and peculiar growth determinant:
the frontier, namely, the possibility to move west to exploit new natural
resources.4
In the west, there were abundant arable lands, pastures, mines for gold
and other important minerals, coal and oil fields, forests, water resources,
buffaloes, furs, fish-rich lakes, rivers, and the ocean.
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