The return of American neoliberalism from the perspective of Trumplaunch coin: survival of the fittest and savage growth

Original Author: @Web3 Mario

This week has been exciting. On January 18th, just two days before his inauguration, Trump personally launched a coin, which skyrocketed by 400% in just a few days! First of all, congratulations to all the friends who seized this wealth opportunity, and I wish you all a happy new year in advance. There have been many discussions about the potential impact of this phenomenal event in the past few days, and I also hope to start a discussion on this. In general, I believe that 'Trump coin' marks the formal return of American neoliberalism, and survival of the fittest and wild growth will become the main theme of this new era. Specifically, in the context of deregulation, Web3 will take up the banner of financial innovation in the new cycle in the United States.

The Development History of Mainstream Economic Theories in American History - The Continuous Exploration of the Relationship between Government and Market

In order to help colleagues understand the impact of these changes more deeply, it is necessary to give a brief overview of the changes and developments in mainstream economics in American history. In fact, the history of the development of economic theories is a history of exploring the relationship between government and the market. With different historical stages and different internal and external contradictions of society, modern sovereign states often adopt different economic strategies to cope with internal and external pressures, ensuring social stability internally and maintaining relative competitive advantages in international geopolitical games externally. The so-called mainstream economic theories are the abstract inductions made by some of the most insightful people based on specific economic phenomena, providing theoretical basis for policy makers. They are not immutable truths in natural science, but more belong to the field of sociology and are applicable to certain specific regions in a certain historical stage.

After clarifying the above premises, let's understand the development history of mainstream economic theories in the United States. In fact, it can be roughly divided into six stages:

1. The departure of the Puritans from Europe during the colonial era: the resistance process of the colonial economic exploitation by the mother country under mercantilism (1600-1776)

Those who are familiar with Western history will know that, unlike most nation-states, the United States is an immigrant country. The uniqueness of an immigrant country lies in the fact that its birth usually depends on certain internal irreconcilable contradictions of the immigrant motherland under a specific background, which leads to the large-scale migration of vulnerable interest groups. This means that immigrant countries usually have much higher cohesion at the beginning of their establishment, for two reasons. Firstly, they are a group of selected interest groups with common ideological and value systems. Secondly, since the distributable benefits of the immigrant country are still abundant at the beginning of its establishment, all classes can enjoy objective benefit distribution, thus having a strong sense of satisfaction.

The birth of the United States can be traced back to the colonial era when the English Puritans withdrew from the European continent in search of a new "Promised Land", and the landmark event here is naturally the well-known "Mayflower" incident, which established the first virgin colony of the British Puritans in North America, Virginia. Here we need to talk a little about the background of the Puritans, we know that the medieval period of the European continent was the so-called theocratic period, and the background of the beginning of this stage was that the Western Roman Empire resisted the barbarian invasion through foreign mercenaries from the perspective of interests and costs, which led to the decline of its own military power, and then gave birth to the prosperity of the barbarian kingdoms on the European continent. In order to cope with this background, the rulers of the Western Roman Empire chose to use the surplus value of the empire to change their identity and mode of rule, and to find legitimacy and authority for their rule by promoting Catholicism originating from the Middle East, so as to alleviate the embarrassing situation of their own military strength. As a result, with the conversion of most of the "barbarian kingdoms", the old ruling class of the Western Roman Empire was transformed into the Holy See, and the mode of rule changed from force to ideological control.

And how exactly is this done? This is because although the barbarian kingdom has a military advantage, it is not good at culture. Therefore, regardless of the East or the West, when the barbarian kingdom occupies certain areas with cultural advantages by force, it will be assimilated. Once the majority of the group is assimilated by a dominant culture, the authority of its ruling class will not be autonomous, but will have to rely on external forces to intervene, whether from top to bottom or from bottom to top. Specifically, because most barbarians converted to Catholicism, such as the Germans, Gauls, Celts, and Angles, the legitimacy of the ruling class of their sovereign states will not depend on national consciousness, but on the coronation of the Roman papacy, thus giving it legitimacy. This model is in fact similar to the Western Zhou's control of the vassal states through the Zhou ritual.

In this context, due to the lack of options for military intimidation, in order to ensure the stability of rule, the Roman Catholic Church had to design complex religious rituals to achieve absolute control over people's thoughts and completely dispel the idea of resistance from these armed "barbarians". Therefore, we will find that in the medieval context, there was basically no similar bottom-up resistance on the European continent as in Eastern civilizations, because the thoughts of the lower class were firmly controlled by the Catholic Church.

However, religion, as a metaphysical discipline, naturally has different views from different people due to their different life backgrounds. Once another opposing ideology is formed, it will inevitably have a fatal impact on the authority of the old mainstream ideology, and this opposition is irreconcilable. Therefore, throughout the Middle Ages, the so-called 'chaos' was not the chaos of internal social order, but the long-term meaningless bloody wars between national alliances with different religious views due to metaphysical value differences.

And with the enormous impact of the brutal war on society, it has given birth to a part of progressives who have reflected on this situation. This has also given birth to the "Enlightenment Movement" and the "Renaissance", which have started to comprehensively impact the Catholic system with cultural reforms centered on liberalism and rationalism. The so-called Puritans are the product of this background, referring to a group of religious extremists in the UK. Their radical thinking focuses on the issue of the authority to interpret the Bible. They believe that the Bible is the only authoritative source, and everyone has the right to interpret it, rather than the traditional practice where only the official church designated by the church has the right to interpret it. This naturally met with suppression from the Catholic group, leading to the removal of these radical religious figures from the church, hence the name Puritans. At that time, it was also the heyday of the Age of Discovery. The development of navigation technology in Europe was rapid. These suppressed interest groups, with their anti-authoritarian and freedom-seeking tendencies, chose to come to the distant North American colonies to establish their own "promised land". This is where the story begins, setting the stage for the American national spirit of anti-authoritarianism, self-awareness, and the pursuit of freedom.

Only after introducing this background can we understand why Americans seem to have some kind of obsession with liberalism. To be specific, although there was a religious freedom environment, economically, the North American colonies at that time were still under the colonial economic system of their mother country. At that time, Britain implemented mercantilism, the core idea of which was that the country should use policies and the application of force, and use gold and silver as the measuring standards, to make exports exceed imports, thus achieving the enhancement of national power. Based on this theoretical basis, Britain usually required colonies to focus mainly on raw material industries such as agriculture and mining, and to suppress the development of manufacturing industry. In this way, with the help of imported raw materials and the export of industrial products with higher added value, it could achieve the plunder and control of the colonial economy. This is the so-called colonial economy, such as restricting colonial trade freedom through the Navigation Acts. Therefore, at this time, a landlord class based on agriculture and a group of progressive people who advocated developing industry to get rid of the economic control of the mother country gradually formed in the North American colonies. During this stage, a large number of iconic events revolved around the conflict between progressive people and the mother country, such as the Boston Tea Party. Finally, after a series of struggles and tugs-of-war, and the strong intervention of France in North American affairs, the United States was officially born, with winning the War of Independence as a symbol.

2. The early days of nation-building with ethnic integration: the struggle between agrarianism and industrialism as the foundation of the country (late 18th century - mid-19th century)

After gaining independent sovereignty, the United States was actually very weak and had to rely on an alliance with France to obtain a certain sense of security. At this time, two mainstream economic theories gradually flourished domestically in the United States. In the previous section, we have explored the formation of the two classes of progressive activists and traditional landlords. Therefore, the two economic theories are respectively supported by these two groups of people.

In the southeastern United States, due to its superior agricultural development advantages, its economic system is mainly based on slave agriculture and plantation industry, naturally the landlord class has obvious advantages in the regional social class. At this time, the United States and France were in a honeymoon period, and France was at a disadvantage in competition with Britain in colonization, so it changed its mercantilist view and proposed agrarianism. Agrarianism is very different from mercantilism. Firstly, agrarianism believes that only agriculture is the industry that produces value, because the raw materials of agriculture are natural and free, such as sunlight, rainwater, land, etc., and the output of agriculture is valuable. This is a process from nothing to something, while industry only processes raw materials, only changes their form, and does not generate value in this process. Therefore, the measure of national strength should be based on the evaluation of its agricultural output, which is very different from the idea of mercantilism that the accumulation of precious metals represents national strength. Secondly, in terms of attitude towards the market, agrarianism believes that although industrial products do not produce value, they are lubricants for economic operation and affect the efficiency of value circulation. A relatively free market system is beneficial for enhancing turnover efficiency, which is also different from the practice encouraged by mercantilism of exporting and restraining imports. Of course, from a retrospective perspective, we can also see that agrarianism is a more optimal choice compared to Britain at that time, when industrial technology was relatively backward but had a population dividend. It can be imagined that the southern landlord class in the United States would naturally support this doctrine.

However, as an important North American trade transit center for Britain, the northern United States naturally has a significant influence from British economic ideas, so the northern region has naturally formed an industrial structure mainly based on trade and primary manufacturing. Also, due to the influence of the colonial economic system, progressive individuals in the northern United States have a clear preference for industry. Therefore, after gaining independent economic status, they naturally vigorously developed industry to break away from the shadow of colonial economy. Under the dual influence of mercantilism and colonial economy, the northern United States formed an economic theory of heavy industry, which believes that industry is the embodiment of national strength. The only way to increase national strength is through the value added by industrial products and raw materials. Therefore, the country should formulate policies such as protective tariffs and encourage the development of local industry as much as possible.

Over time, two distinct cultural groups developed between the North and the South of the United States, with the North being known as the Yankee, a term that originally meant the descendants of the inhabitants of the New England region of the northern United States; Later, its folkloric significance extended to all inhabitants of the northeastern region of the United States (New England, the Mid-Atlantic states, the Upper Great Lakes, etc.), as well as northerners during and after the American Civil War. The South, on the other hand, calls itself Dixie, referring to the southern states of the United States and the people of the region. Cultural differences eventually led to a complete split, culminating in the Civil War in the United States, which ended with the absolute victory of the Yankee cultural groups in the North who advocated the doctrine of heavy industry, and the mainstream economic doctrine in the United States was dominated by heavy industrialism. The landmark event was President Hamilton's Manufacturing Report (1791), which laid the foundations for U.S. industrial policy by proposing protectionist tariffs and a federal bank. Of course, this also includes the Tariff Act of 1816, which protects domestic manufacturing from cheap imports.

3. The Age of Manifest Destiny's Expansion and the Roaring Twenties: Laissez-Faire and Classical Economics (Mid-19th-Early 20th Century)

With the United States relying on the abundant supply of raw materials on the North American continent, the rapid development of industrialization, the United States national strength has achieved great development, and at that time a great sense of superiority, as well as the innate sense of mission of Christianity, the American people at this time germinated a general imperialist sentiment, so the United States also came to the era of western expansion, at that time the central and western parts of North America were controlled by indigenous tribes, and most of these indigenous tribes had long-term dealings with Western colonists, especially represented by Spain, France and Britain. The United States, through the Homestead Act and other policies, encouraged the people to go west independently to seize indigenous lands, and under this vigorous westward movement, the United States territory started from the Mississippi River, guiding the Taiping Sheep to stop the pace of expansion, across the entire North American continent.

At this time in mainland Europe, the rise of classical economics also deeply influenced American society. Classical economics, which emerged in the late 18th century and early 19th century, is a system of economic thought and the foundation of modern economics. It emphasizes market self-regulation, free competition, and economic freedom, laying the theoretical foundation for the capitalist economic system. This school of thought mainly explores core economic issues such as production, distribution, and growth.

In fact, the birth of classical economics was not accidental. Referring to the experiences of representative figures, it is not difficult to find that Adam Smith, for example, was born in Scotland and naturally influenced by mercantilism. However, under mercantilism, the state's strong intervention in industry and the increasing financial pressure to maintain the colonial system, Adam Smith was also deeply inspired by French physiocracy during his exchanges in France. He absorbed the core ideas of physiocracy, such as the meaning of free markets, the government's attitude towards market intervention, the analysis logic of commodity value, and the government's analysis of economic conditions through mathematical models. Of course, there are also differences. For example, classical economics believes that agriculture is not the only industry that produces value. The true source of commodity value is labor.

In such economic theories, it is obviously more suitable for the modern era, which has already completed the enlightenment movement in the civilized West. And with the accelerating human rights movement, there is a growing aversion to government intervention, gradually forming a social consensus. At this stage, most Western countries are

Adhering to minimal government intervention, more open international trade policies, and allowing the economy to develop freely relying on the power of the market. This policy is also known as laissez-faire. It has also led to the rapid rise of the capitalist class. Influenced by David Ricardo's theory of comparative advantage, countries also support their respective advantageous industries based on their own industrial advantages. During this stage, like most Western countries, all industries in the United States are developing comprehensively and showing a thriving trend. However, the contradiction between the working class and the capitalists brought about by industrial development is gradually intensifying, casting a red cloud over the European continent.

Marx's economics is a kind of inheritance and dialectical critique of classical economics, and its core idea continues the labor theory of value in classical economics. With the help of materialism, he explored the relations of production and developed the theory of surplus value, which was used to reveal the mechanism of capitalist exploitation. Its essence is a change in the political system. In order to respond to the criticism of some phenomena in classical economics pointed out by Marx's economics, classical economics has also evolved, and some deficiencies in classical economics have been improved by introducing the "marginal theory", such as the analysis of commodity value from the labor theory of value to the marginal theory of value, and how the market regulates prices. This is also known as neoclassical economics. But in fact, both ideas have entered the stage of independent development, with Marxist economics finding the soil for its spread in the East, while neoclassical economics runs through the development of the West.

4. Turbulent Great Depression Era: Big Government and Keynesianism (1929-1980)

With the rapid development of the industry, the pace of financial innovation has not stopped. The most representative is the vigorous development of the US stock market. Due to the free market concept emphasized by classical economics, it is possible to minimize government intervention, which has led to a state of uncontrolled capital development.

In the 1920s, also known as the Roaring Twenties, the American economy experienced rapid growth, with a highly prosperous stock market. However, much of this growth was based on speculation and excessive credit expansion. Additionally, with the rapid development of industry, most sectors experienced a certain degree of oversupply, while income growth lagged behind, resulting in insufficient purchasing power. Under these circumstances, the US stock market entered a phase of irrational prosperity, with the majority of company stock values far exceeding their actual worth and speculation reaching extremely high levels.

And the capital feast ultimately ended in the Great Depression, referred to as the global economic crisis of the 1930s, which centered on the United States but had profound effects on the global economy and society. This period was characterized by economic depression, a sharp increase in unemployment, and widespread social unrest. On October 24, 1929 ("Black Thursday"), the stock market began to collapse, leading to a large number of investors going bankrupt. The accelerated decline on October 29 ("Black Tuesday") marked the beginning of the Great Depression. It wasn't until 1933 that the U.S. unemployment rate reached as high as 25%, and industrial production dropped by nearly 50%. Thousands of banks closed, depositors lost their savings, and the credit market froze. Many families were unable to pay their mortgages and basic living expenses, leading to a surge in homelessness.

This crisis has had far-reaching effects globally, with severe impacts on the economies of Europe, Latin America, and Asia. International trade is on the brink of collapse, with global trade volumes falling by about two-thirds. It can be said that the fuse of World War II can be traced back to this, which is not an exaggeration.

In response to this crisis, Keynesian Economics was born, one of the most influential economic theories of the 20th century, published in 1936 by the British economist John Maynard Keynes in The General Theory of Employment, Interest and Money Money). This theory mainly focuses on how to achieve full employment and economic growth through government intervention, and is a critique and revision of the "market self-regulation" of classical economics.

Since the trigger for this crisis was the stock market bubble caused by insufficient demand and excessive speculation, the core theory of Keynesianism is mainly built around these two aspects, one is the effective demand theory, Keynes believes that the root cause of economic recession is insufficient effective demand, not the problem of productive capacity. The effective demand is composed of four aspects, total consumption (C) + total investment (I) + government expenditure (G) + net export (NX), so when consumption, investment, net exports and other private behaviors are weak, and the economy shows signs of recession, the government can intervene through the government to point out to boost the effective social demand. The second is that the government should exercise strong control over capital expansion to avoid excessive speculation in financial markets, which could create systemic risks.

The New Deal under President Roosevelt marked the formal adoption of Keynesianism as the mainstream economic doctrine in the United States. Through the New Deal, Roosevelt implemented measures of massive intervention in the economy. For example, significant investment in public infrastructure stimulated domestic demand, while also rebuilding the financial credit system and promoting financial system reforms. New regulatory frameworks were established, such as the Securities and Exchange Commission (SEC), to strengthen control over the financial market.

With the introduction of the New Deal by Roosevelt, the United States was quickly able to overcome the Great Depression, and with the help of two World Wars, it emerged as one of the two poles of the world. Keynesianism also established its historical position.

5. The Age of Stagflation in the Bipolar Cold War: Neoliberalism and the Supply-Side School

As time continued to develop, after World War II, the world entered the bipolar Cold War stage under the iron curtain. The main theme of the world's political and economic situation at this time was the struggle between left and right, the confrontation between the socialist camp and the capitalist camp. Although there was no direct conflict between the United States and the Soviet Union, proxy wars frequently occurred. After experiencing rapid development in the post-war reconstruction, the United States first encountered a bottleneck in the 1970s. This was the advantageous stage for the socialist camp. After the defeat in the Vietnam War, the United States entered a stage of strategic contraction and defense. At this time, there were also two triggers. Firstly, the collapse of the Bretton Woods system in 1971, as the United States abandoned the pegging of the dollar to gold (the Nixon shock), the fixed exchange rate system disintegrated, leading to increased instability in the international economic system of the capitalist camp. Secondly, the oil crisis caused by the Middle East war led to a surge in oil prices, further exacerbating inflation.

Against this background, the United States experienced severe stagflation, with economic growth coming to a halt while inflation and unemployment rates continued to rise. In response to this problem that Keynesianism could not solve, a group of economists represented by the Chicago School and the Austrian School put forward a solution known as neoliberalism. The former mainly focused on the construction of economic theory, while the latter criticized the political system more. Since the core idea of neoliberalism is that stagflation is caused by excessive government intervention, which seriously affects the vitality of corporate innovation, leading to high production costs on the supply side and a lack of full competition in the market. Therefore, it advocates a return to a small government, avoiding excessive regulation, reducing corporate taxes, controlling government spending and other means, and revitalizing the supply side. Therefore, it is also known as the supply-side school. Of course, in terms of theory, the biggest difference between neoliberalism and Keynesianism is that the former advocates using monetary policy means, rather than fiscal intervention means, to regulate the economy.

With the 1979-1980, the US inflation rate reached nearly 14%, much higher than the historical average. The unemployment rate rose to 7.8% in 1980 and reached 10.8% in 1982, the highest level since the Great Depression. Republican candidate President Reagan won the US election and chose to base his administration on neoliberalism, vigorously implementing 'Reaganomics' along with Fed Chairman Volcker's monetary tightening policy. This eventually helped the US overcome the stagnant situation and ultimately win the Cold War. As a side note, Trump's policies have often been compared to Reagan's policies.

6. The era of massive liquidity during the subprime mortgage crisis: quantitative easing and post-Keynesianism

With loose monetary policy and the relaxation of regulatory policies, the U.S. economy, driven by financial and technological innovation, has entered a stage of rapid expansion of globalization, with financial institutions diversifying risks globally through innovative products (such as asset-backed securities), and the global financial system is highly interconnected. At the same time, the U.S. housing market, which experienced consistent price increases in the early 2000s, was considered a safe area to invest in, attracting a lot of capital.

Under this double resonance, the United States created a huge asset bubble based on subprime mortgages, represented by high-risk housing mortgages, combined with the design of numerous financial derivatives. However, we already know the ending of the story, with the increase in subprime mortgage defaults and the decline in collateral value, which led to a sharp drop in the value of a large number of asset-backed securities. The dominoes began to fall, ultimately culminating in the fourth largest investment bank in the United States, Lehman Brothers, filing for bankruptcy protection, marking the climax of the crisis and triggering global financial market turmoil.

The impact of the financial crisis is far-reaching. The American people are extremely dissatisfied with the Republican government's laissez-faire attitude towards capital, which has led to such a crisis, and this has also affected the readjustment of mainstream economics in the United States. Post-Keynesianism has declared its return. One of the core arguments that neoliberal economists have long criticized Keynesianism for is based on the rational economic man. If monetary and fiscal policies are predictable, economic agents will adjust their behavior in advance to offset policy effects. Therefore, boosting the economy through fiscal policy is ineffective.

To address these doubts, Keynesianism has also made new revisions, among which price and wage stickiness and imperfect competition in the market have the most influence. The former explains why fiscal policy has a lagging effect on the economy, and the latter clarifies the problem of oligopoly in the market, and the impact on equilibrium prices in the context of imperfect competition in monopolistic market types. Of course, post-Keynesianism also integrates the most important theories of neoliberalism, that is, influencing the economy through both monetary policy and fiscal policy. Furthermore, post-Keynesianism goes further to propose rational expectations management to address the lag of monetary policy relative to economic crises. This is based on the rational economic agent argument of neoliberalism, guiding market expectations through the foresight of relevant officials, thereby intervening in the market in advance and enhancing the efficiency of monetary and fiscal policies. Therefore, the familiar features such as the control of 2% inflation and the observation of forward guidance by Federal Reserve officials are all products of this background.

Of course, in this cycle, as the executor of post-Keynesianism, the Democratic administration has mainly addressed the impact of the financial crisis through three arrows: large-scale fiscal spending and unconventional quantitative easing, extremely loose monetary policy, and increasingly tighter financial regulation. Helped the United States escape the effects of the financial crisis. The story has come to the present.

Under Trump's leadership, the resurgence of American neoliberalism, Web3 will bear the banner of financial innovation in the new American cycle.

Throughout the evolution of mainstream economic theories in the United States, it is easy to see that this is a continuous exploration of the relationship between the government and the market, influenced by different historical events, policies have been constantly swaying between the government and the market. The theories that lean towards the former emphasize the effectiveness of government intervention in the economy, while those that lean towards the latter emphasize the higher efficiency of resource allocation by the market. Considering Trump's own life experiences and the stage at which his important life views were formed, it happened to coincide with the low ebb of Keynesianism in the 1970s. With the implementation of neoliberalism by President Reagan, the United States was able to overcome its difficulties. Therefore, it becomes easy to understand Trump's desire to help America become great again through similar strategies.

In Trump's discourse framework, the Democratic Party's economic policies have caused three fatal problems:

Massive fiscal stimulus packages and quantitative easing policies have plunged the United States into a debt crisis;

The protective policies for Silicon Valley's high-tech industry have led to misallocation of resources, overallocation to the high-tech industry, and complete abandonment of traditional industries, resulting in the decline of American industry.

Government intervention has led to a large amount of information asymmetry, resulting in horizontal capital redistribution among different industries and widening wealth gaps across industries, exacerbating unfairness.

So in this context, I believe that Trump's issuance of coins in the first two days of officially taking office is not only for the purpose of amassing wealth, but also to send a signal, which is to hope to set the tone for Web3 to become a new core battlefield for financial innovation in its supply-side reform process without supervision. And the benefits of doing so are also quite obvious:

1. Can bypass the constraints of the complex interest groups formed in the traditional financial field operated by the Democratic Party for many years;

The open, transparent, and trustless nature of the Web3 technological paradigm coincides with neoliberalism. By eliminating the intervention of all authoritative organizations, allowing the market mechanism to completely adjust the distribution of benefits will be more conducive to the implementation of neoliberalism.

3. Currently, most assets in the Web3 world are priced in US dollars, so promoting related assets also has a positive significance for maintaining the dominance of the US dollar;

4. The censorship-resistant features of Web3 make capital flow more efficient and can bypass financial policy restrictions imposed by other sovereign countries, fully leveraging the financial advantages of the United States;

Of course, the impact of doing so is obvious. The most direct negative impact must be similar to that of 2008, and it is bound to be greater and more far-reaching than the impact of the 2008 financial crisis. The higher systemic financial risks and vertical wealth redistribution between the rich and the poor are inevitable. However, the time period for this risk to occur must be medium to long term. In summary, the author is very interested in the future direction of financial innovation based on Web3 and traditional industries in the United States in the next two years, and will continue to pay attention to it. Interested friends are also welcome to discuss with the author.