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A view from an economist: Trump speech to UN on socialism, payments, women

This new column will address the economics of current policy issues. Writer Dr. Jackie Brux is an Emeritus Professor of Economics and Founder/Director of the Center for Development at UW-RF; and author of the college textbook, Economic Issues and Policy.

Donald Trump's address to the United Nations on Sept. 19 focused on many political issues that have clear economic implications. Let's consider the economics of these topics in two separate columns in the River Falls Journal.

1."Wherever true socialism or communism has been adopted, it has delivered anguish and devastation and failure."

If you were watching the speech, you saw that many UN members looked disturbed by this statement, since many countries, including those in Europe, have adopted some socialist policies very successfully. The problem: Trump is confusing an economic system with a political one. Socialism is an economic system. Communism is an authoritarian political system.

A socialist economic system can exist along with either a democratic political system or an authoritarian one. The primary characteristics of socialism are

i) government ownership of assets like land and factories, and

ii) government economic decision making (such as setting prices). (A capitalist economic system is characterized by private ownership, along with market determined prices.)

No economic system is entirely socialist or entirely capitalist. Even in the countries we often think of as socialist, such as those mentioned below, the government role is sharply limited.

2. "The Socialistic dictatorship of Nicolas Maduro in Venezuela has .... destroyed a prosperous nation by imposing a failed ideology that has produced poverty and misery everywhere it has been tried."

Mr. Trump is on shaky economic grounds here, not just regarding Venezuela, but many other countries with this supposedly failed ideology. Maduro's government is not what caused the incredible poverty and misery there. In fact, Maduro has consistently worked toward improving the lives of the poor. However, the most serious problem facing Venezuela's economy today is the recent plunge in oil prices, which Venezuela has no control over.

3. "The U.S. has stood against the corrupt and destabilizing regime of Cuba .... and we will not lift sanctions .... until it makes fundamental reforms."

I guess it would surprise Mr. Trump to learn that Cuba, and other countries with failed ideologies (such as Vietnam and China), have been steadily implementing fundamental reforms since the 1980s. (The term 'economic reform' refers to a shift toward more capitalist policies.)

I've visited and researched the reforms in these three countries. Cuba has opened up the tourist and agricultural sectors, and is beginning to reform other sectors. Cuba now has better health care and educational systems than the U.S! These are documented by the World Bank with standard indicators such as number of pupils per teacher and life expectancies.

Poorer countries like Vietnam and China have initiated similar successful reforms. For example, when Vietnam allowed rice prices to float to international levels, the country moved from importing rice to becoming one of the world's largest exporters of rice in just a few years. Their farmers are flourishing and the country has experienced very high rates of growth. China has also used similar policies to generate growth and reduce poverty.

4. "We have invested in the Women Entrepreneurs Finance Initiative, part of our commitment to empowering women all across the globe."

I agree that this is extremely important. I've spent considerable time in African and other countries, examining the effects of policies that target women. My findings include that fact that women typically cannot borrow money, either because they lack literacy and numeracy, are not heads of households, and cannot take time to go to urban credit institutions. Nor can they afford to lose collateral, which is typically land and livestock. I've found that micro-credit (small loans) to poor groups of women entrepreneurs can overcome many of these problems. I recently initiated a successful new group program In Kenya.

Education of women is also important, insofar as there are strong correlations between the education of women with i) lower fertility, ii) greater survival of their children, and iii) greater likelihood of educating their children. Thus, the benefits are inter-generational and sustainable.

In two weeks, this column will focus on other aspects of Trump's speech, specifically, the relation between immigration, refugees, and trade with U.S. jobs.

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