The Return of American Neoliberalism Seen Through Trump's Currency Issuance: Survival of the Fittest and Barbaric Growth

Author: ++@Web3Mario++

Abstract: This week has been truly exciting. On January 18, just two days before officially taking office as president, Trump personally launched a cryptocurrency, which surged by as much as 400 times in just a few days! First of all, congratulations to those who seized this wealth opportunity, and I wish everyone a happy New Year in advance. There has been much discussion about the potential impacts of this phenomenal event, and I hope to initiate a discussion on this topic. Overall, I believe that "Trump's cryptocurrency launch" marks the formal return of American neoliberalism, where survival of the fittest and barbaric growth will become the main theme of this new era. More specifically, against the backdrop of deregulation, Web3 will take up the banner of financial innovation in the new cycle of the United States.

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

To help everyone better understand the impact of these changes, I believe it is necessary to provide a brief overview of the evolution of mainstream economic theories in American history. In fact, the history of economic theory development is a history of exploring the relationship between government and market. Throughout different historical stages, modern sovereign states often adopt different economic strategies to cope with internal and external pressures, ensuring social stability domestically and maintaining relative competitive advantages in international geopolitical games. The so-called mainstream economic theories are abstract generalizations made by the most insightful individuals based on specific economic phenomena, providing theoretical foundations for policymakers. They are not immutable truths in the realm of science but belong more to the field of sociology, applicable to specific regions during certain historical periods.

With this premise clarified, let us understand the development history of mainstream economic theories in American history, which can roughly be divided into six stages:

1. Colonial Era under the Background of Puritan Exodus from Europe: The Resistance Against the Exploitation of Colonial Economy by the Mother Country under Mercantilism (1600-1776)

Those familiar with Western history will know that, unlike most nation-states, America is an immigrant country. The uniqueness of an immigrant nation lies in its birth, which usually relies on certain irreconcilable internal contradictions of the immigrant's mother country, leading to large-scale migration of disadvantaged interest groups. This means that the cohesion of an immigrant nation at its inception is often much higher than that of a nation-state for two reasons: first, it is a group of selected individuals with a common ideology and values; second, at the beginning of the establishment of an immigrant nation, the distributable interests are still abundant, allowing all classes to enjoy objective benefits, resulting in a strong sense of satisfaction.

The birth of America can be traced back to the colonial era when English Puritans fled the European continent in search of a new "promised land." The iconic event here is the well-known "Mayflower" incident, which established the first virgin colony of English Puritans in North America, Virginia. It is necessary to elaborate a bit on the background of the Puritans. We know that the medieval period in continental Europe was characterized by the so-called theocratic rule. The background of this era began with the Western Roman Empire, which, from the perspective of interests and costs, used foreign mercenaries to resist barbarian invasions, leading to the decline of its military power and the rise of barbarian kingdoms in Europe. To cope with this background, the rulers of the Western Roman Empire chose to utilize the empire's surplus value, transforming their identity and ruling model, using the promotion of Catholicism, which originated from the Middle East, to find legitimacy and authority for their rule, alleviating the embarrassment of their insufficient military strength. The result was that with the conversion of most "barbarian kingdoms," the old ruling class of the Western Roman Empire transformed into the Roman Papacy, and the ruling model shifted from military suppression to ideological control.

How was this achieved? This is because, although barbarian kingdoms had military advantages, they were not adept in cultural matters. Therefore, whether in the East or the West, when barbarian kingdoms used military force to govern regions with certain cultural advantages, they would be assimilated. Once a majority of the group is assimilated by a dominant culture, the authority of the ruling class loses its autonomy and must rely on external intervention. Specifically, since most barbarians converted to Catholicism, such as the Germans, Gauls, Celts, and Anglo-Saxons, the legitimacy of the ruling class of their sovereign states would not depend on national consciousness but on the legitimacy conferred by the Roman Papacy through coronation. This model is similar to how the Western Zhou Dynasty controlled vassal states through Zhou rites.

In this context, lacking the option of military intimidation, the Roman Papacy had to design complex religious rituals to achieve absolute control over people's thoughts, completely dispelling any rebellious thoughts from these armed "barbarians." Thus, we find that under the medieval backdrop, there was essentially no grassroots rebellion similar to that in Eastern civilizations, as the thoughts of the lower classes were firmly controlled by Catholicism.

However, as a metaphysical discipline, religion naturally leads to different interpretations by individuals with varying life backgrounds. Once an opposing ideology forms, it inevitably poses a fatal challenge to the authority of the old mainstream thought, and this opposition is irreconcilable. Therefore, throughout the medieval period, the so-called "chaos" was not a disorder within social order but rather a series of senseless bloody wars between national alliances holding different religious views, stemming from long-standing differences in metaphysical values.

As the brutal wars brought immense shocks to society, a portion of progressive individuals began to reflect on this status quo, giving rise to the "Enlightenment" and "Renaissance," with liberalism and rationalism at their core, launching a cultural revolution that comprehensively challenged the Catholic system. The so-called Puritans emerged as a product of this background, referring to a group of religious radicals in England whose radical ideas focused on the issue of biblical interpretation rights. They believed that the Bible was the only authoritative text that everyone could interpret, rather than being restricted to the official church designated by the Papacy. Naturally, this was met with repression from the Catholic group, leading to these radical religious figures being excommunicated, hence the term "Puritan." At the same time, coinciding with the Age of Exploration, the rapid development of European navigation technology led these oppressed, anti-authoritarian, freedom-seeking interest groups to choose to migrate to the distant North American colonies to establish their own "promised land." This is where the story begins and lays the foundation for anti-authoritarianism, self-awareness, and the pursuit of freedom as the national spirit of America.

With this background introduced, we can understand why Americans seem to have a certain obsession with liberalism. To get back on track, although they had a religiously free environment, the North American colonies were still under the colonial economic system of their mother country at that time. Britain was implementing mercantilism, the core idea of which was that the state should use policies and military force, measured by the two precious metals of gold and silver, to ensure that exports exceeded imports, thereby enhancing national power. Based on this theoretical foundation, Britain typically required the colonies to focus primarily on agriculture, mining, and other raw material industries while stifling the development of their manufacturing industries. This way, by importing raw materials and exporting higher value-added industrial products, they could plunder and control the colonial economy, which is known as the colonial economy, such as through the Navigation Acts that restricted the trade freedoms of the colonies. Thus, during this period, a landlord class primarily based on agriculture gradually formed in the North American colonies, alongside a group of progressives advocating for industrial development to break free from the economic control of the mother country. Many significant events during this stage revolved around the conflicts between progressives and the mother country, such as the Boston Tea Party. Ultimately, after a series of struggles and pulls, along with the strong intervention of France in North American affairs, the victory of the American War of Independence marked the official birth of the United States.

2. The Early Nation-Building Period of Ethnic Integration: The Struggle Between Agrarianism and Industrialism (Late 18th Century to Mid-19th Century)

After gaining independence, the United States was still quite weak at this time and had to rely on its alliance with France for a sense of security. During this period, two mainstream economic theories gradually flourished in the United States. In the previous section, we discussed the formation of the progressive class and the traditional landlord class, and these two economic theories were supported by these two groups.

In the southeastern region of the United States, due to its advantageous agricultural development, the economic system was primarily based on slave agriculture and plantations, which naturally gave the landlord class a significant advantage in social class power within the region. At this time, coinciding with the honeymoon period between the U.S. and France, France, being at a disadvantage in its colonial competition with Britain, shifted its mercantilist viewpoint and proposed agrarianism. Agrarianism differs significantly from mercantilism; first, agrarianism holds that only agriculture is the sole industry that generates value because its raw materials are natural and free, such as sunlight, rain, and land, while the output of agriculture is valuable, representing a process from nothing to something. In contrast, industry merely processes raw materials, changing their form without generating value. Therefore, the assessment of national strength should be based on the evaluation of agricultural output, which greatly differs from the mercantilist idea that the accumulation of precious metals represents national strength.

Secondly, regarding the attitude towards the market, agrarianism believes that although industrial products do not generate value, they serve as lubricants for economic operation, affecting the efficiency of value circulation. A relatively free market system is beneficial for enhancing turnover efficiency, which also contrasts sharply with the mercantilist practice of encouraging exports and restraining imports. Of course, from a retrospective perspective, we can see that agrarianism was a more optimal choice for the United States at that time, which, compared to Britain, had relatively backward industrial technology but possessed a demographic dividend. It is easy to imagine that the Southern landlord class would naturally support this theory.

However, the Northern United States, as an important trade hub for British North American trade, was significantly influenced by British economic ideas. Therefore, the North naturally formed an industrial structure primarily based on trade and primary manufacturing. Due to the adverse effects of the colonial economic system, the progressive individuals in the North had a clear preference for industry. Thus, after gaining independent economic status, they naturally sought to vigorously develop industry to break free from the shadow of the colonial economy. Under the dual influence of mercantilism and the colonial economy, the North developed an economic theory of heavy industry, which posited that industry was the embodiment of national strength, and that the only way to increase national strength was through the value-added difference brought by industrial products and raw materials. Therefore, the state should implement policies such as protective tariffs to encourage the development of domestic industry as much as possible.

As time progressed, the North and South gradually formed two culturally distinct groups. The North was referred to as Yankees, a term originally meaning the descendants of residents from the New England region of the northern United States; later, its folk meaning extended to all residents of the northeastern United States (New England, Mid-Atlantic states, Upper Great Lakes region, etc.) and to the Northerners during and after the American Civil War. The South, on the other hand, referred to itself as Dixie, indicating the southern states of the United States and the people of that region. The cultural differences ultimately led to a complete split, culminating in the American Civil War, which ended with the Yankees, who advocated for the heavy industrial theory, achieving absolute victory. Thus, the mainstream economic theory in the United States became predominantly industrialism. A hallmark event was President Hamilton's "Manufacturing Report" (1791), which proposed protective tariffs and a federal bank, laying the foundation for U.S. industrial policy. This also included the Tariff Act of 1816, which protected domestic manufacturing from the impact of cheap imported goods.

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

As the United States rapidly industrialized, leveraging the abundant raw material supply of the North American continent, its national power experienced tremendous growth. During this time, a sense of superiority and the inherent mission of Christianity led to a widespread imperialist sentiment among the American populace. Thus, the United States entered the era of westward expansion, marked by the control of the Midwest by indigenous tribes, many of whom had long interacted with Western colonizers, particularly represented by Spain, France, and Britain. The U.S. encouraged its citizens to move westward and seize indigenous lands through policies like the Homestead Act. In this vigorous westward movement, U.S. territory expanded from the Mississippi River to the Pacific Ocean, halting only after crossing the entire North American continent.

At this time, the rise of classical economics in Europe also deeply influenced American society. Classical economics is an economic thought system formed from the late 18th century to the 19th century and serves as the foundational theory of modern economics. It emphasizes spontaneous market regulation, free competition, and economic freedom, laying the theoretical foundation for the capitalist economic system. This school primarily explores core economic issues such as production, distribution, and growth.

In fact, the birth of classical economics was not accidental. Looking at the experiences of its representative figures, such as Adam Smith, who was born in Scotland, it is evident that he was deeply influenced by mercantilism. However, the strong intervention of the state in industries under mercantilism and the increasing fiscal pressures to maintain the colonial system led Adam Smith to be inspired by French agrarianism during his exchanges in France. He absorbed core ideas from agrarianism, such as the significance of free markets, the government's attitude towards market intervention, the analytical logic of commodity value, and the government's use of mathematical models to analyze economic conditions. Of course, there were differences, such as classical economics not viewing agriculture as the only value-generating industry, asserting that the true value of commodities comes from labor.

This economic theory was evidently more suited to the newly enlightened West that had completed the Enlightenment movement. Moreover, as the human rights movement accelerated, a growing consensus against government intervention formed in society. During this stage, most Western countries pursued minimal government intervention and more open international trade policies, allowing economic freedom to develop based on market forces. This policy is also known as laissez-faire. This also spurred the rapid rise of the capitalist class. Influenced by Ricardo's theory of comparative advantage, countries supported their advantageous industries based on their own industrial strengths. During this stage, like most Western countries, all industries in the U.S. developed comprehensively, presenting a flourishing scene. However, the contradictions between the working class and business owners brought about by industrialization gradually intensified, casting a red cloud over the European continent.

The proposal of Marxian economics was both an inheritance and a dialectical critique of classical economics, with its core idea continuing the labor theory of value found in classical economics. It explored production relations through materialism, developing into the theory of surplus value to reveal the mechanisms of capitalist exploitation. Its essence is a transformation of political systems. In response to the critiques of certain phenomena in classical economics pointed out by Marxian economics, classical economics also evolved, introducing "marginal theory" to address some shortcomings, such as transitioning from labor theory of value to marginal utility theory and exploring how markets regulate prices. This is known as neoclassical economics. However, in reality, both lines of thought entered independent developmental phases, with Marxian economics finding fertile ground for dissemination in the East, while neoclassical economics permeated the development of the West.

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

With the rapid development of industry, financial innovation did not cease, with the booming U.S. stock market being the most representative example. The classical economic emphasis on free market principles and minimizing government intervention led to an uncontrolled state of capital development.

As we entered the 1920s, known as the "Roaring Twenties," the U.S. economy experienced rapid growth, and the stock market thrived. However, much of this growth was built on speculation and excessive credit expansion. Moreover, with the rapid industrial development, most industries exhibited a certain degree of supply surplus, while residents' income growth lagged, leading to insufficient purchasing power. Under the influence of these two situations, the U.S. stock market entered a phase of irrational exuberance, with most corporate stock values far exceeding their actual values and a high proportion of speculation.

This capital feast ultimately ended in the Great Depression, a global economic crisis that occurred in the 1930s, centered in the United States but having profound impacts on the global economy and society. This period was characterized by economic depression, soaring unemployment rates, and widespread social unrest. On October 24, 1929 (Black Thursday), the stock market began to crash, leading to the bankruptcy of numerous investors. The accelerated decline on October 29 (Black Tuesday) marked the beginning of the Great Depression. By 1933, the unemployment rate in the U.S. reached 25%, and industrial production fell by nearly 50%. Thousands of banks failed, depositors lost their savings, and the credit market froze. Many families could not afford to pay mortgages and basic living expenses, leading to a surge in homelessness.

This crisis also had far-reaching effects globally, severely impacting the economies of European, Latin American, and Asian countries. International trade was on the brink of collapse, with global trade volumes declining by about two-thirds. It is not an exaggeration to say that the trigger for World War II can be traced back to this.

In response to this crisis, Keynesianism emerged. Keynesianism is one of the most influential economic theories of the 20th century, proposed by British economist John Maynard Keynes in his 1936 publication "The General Theory of Employment, Interest and Money." This theory primarily focuses on how to achieve full employment and economic growth through government intervention, critiquing and revising the classical economic idea of "market self-regulation."

Since the root causes of this crisis were insufficient demand and excessive speculation leading to stock market bubbles, the core theories of Keynesianism were built around these two aspects. First is the theory of effective demand, where Keynes argued that the fundamental cause of economic recession is insufficient effective demand, rather than production capacity issues. Effective demand consists of four components: total consumption (C) + total investment (I) + government spending (G) + net exports (NX). Therefore, when private sector behaviors such as consumption, investment, and net exports show signs of weakness, leading to economic recession, the government can intervene to boost effective demand. Second, the government should provide strong monitoring of capital expansion to prevent excessive speculation in financial markets, thereby avoiding systemic risks.

The New Deal marked the formal establishment of Keynesianism as the mainstream economic theory in the United States. President Roosevelt implemented large-scale economic intervention measures through the New Deal. For example, many public infrastructure investments stimulated domestic demand, rebuilt the financial credit system, and promoted financial system reforms, establishing new regulatory frameworks (such as the Securities and Exchange Commission) to strengthen control over financial markets.

With the introduction of the New Deal, the U.S. quickly emerged from the Great Depression, and after the two World Wars, it became one of the world's superpowers. Keynesianism also solidified its historical position.

5. The Stagflation Era Under Bipolar Cold War: Neoliberalism and Supply-Side Economics

As time progressed, following World War II, the world entered a bipolar Cold War phase under the Iron Curtain, where the main theme of global politics and economics 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 U.S. and the Soviet Union, proxy wars occurred frequently. After both sides experienced rapid development from post-war reconstruction, the U.S. first encountered a bottleneck in the 1970s. This was a phase of advantage for the socialist camp, and after experiencing the defeat in the Vietnam War, the U.S. entered a stage of strategic contraction and defense. Additionally, there were two triggers: first, the collapse of the Bretton Woods system (1971), as the U.S. abandoned the gold standard (Nixon Shock), leading to the disintegration of the fixed exchange rate system and exacerbating the instability of the international economic system of the capitalist camp. Second, the oil crisis caused by the Middle East wars led to skyrocketing oil prices, further raising inflation.

In this context, the U.S. faced severe stagflation, with economic growth stagnating while inflation and unemployment rates continued to rise. To address this predicament that Keynesianism could not resolve, economists proposed another solution. A group of economists represented by the Chicago School and the Austrian School put forward the so-called neoliberalism, with the former focusing on economic theory construction and the latter emphasizing critiques of political systems. Since the core idea of neoliberalism posits that the causes of stagflation lie in excessive government intervention, severely impacting the vitality of enterprise innovation and leading to increased production costs on the supply side, it advocates for a return to small government, avoiding excessive regulation, reducing corporate taxes, and controlling government spending to restore vitality to the supply side, hence also being referred to as supply-side economics. Of course, at the theoretical level, the biggest difference between neoliberalism and Keynesianism lies in its advocacy for economic regulation through monetary policy rather than fiscal intervention.

As inflation in the U.S. approached 14% in 1979-1980, far exceeding historical averages, 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 U.S. election and chose neoliberalism as the foundation of his administration, vigorously promoting "Reaganomics" alongside the monetary tightening policy of Federal Reserve Chairman Volcker. This enabled the U.S. to ultimately overcome the stagflation crisis and win the Cold War. It is worth noting that Trump's policies have often been compared to Reagan's.

6. The Era of Quantitative Easing After the Subprime Mortgage Crisis: Quantitative Easing and Post-Keynesianism

This segment of history is more familiar to everyone. With loose monetary policies and relaxed regulatory measures, the U.S. economy, driven by financial and technological innovations, entered a phase of rapid globalization. Financial institutions spread risks globally through innovative products (such as asset-backed securities), leading to a highly interconnected global financial system. Meanwhile, the U.S. real estate market experienced sustained price increases in the early 2000s, regarded as a safe investment area, attracting substantial capital.

Under this dual resonance, the U.S. created a massive asset bubble based on high-risk subprime mortgages, combined with numerous financial derivatives. However, we already know the story's conclusion: as the default rates on subprime loans surged and collateral values plummeted, the value of many asset-backed securities shrank. The domino effect began to collapse, culminating in the bankruptcy protection of Lehman Brothers, marking the peak of the crisis and triggering turmoil in global financial markets.

The impact of this financial crisis was profound, leading to extreme dissatisfaction among the American public with the Republican government's laissez-faire attitude towards capital, which contributed to such a crisis. This also influenced the re-adaptation of mainstream economic theories in the U.S., with post-Keynesianism announcing its return. One of the core arguments of neoliberal economists against Keynesianism has been based on the rational economic man assumption: if monetary and fiscal policies are predictable, economic agents will adjust their behaviors in advance, offsetting policy effects.

In response to these criticisms, Keynesianism also made new adjustments, with price and wage stickiness and imperfect competition markets being the most influential. The former explains why the effects of fiscal policy on the economy have lagged, while the latter clarifies the existence of oligopolistic issues in markets and their impact on equilibrium prices under imperfect competition. Of course, post-Keynesianism also integrated the most important theories of neoliberalism, namely the joint influence of monetary and fiscal policies on the economy. Furthermore, post-Keynesianism advanced the concept of rational expectations management to address the lagging nature of monetary policy in relation to economic crises. This is based on the neoliberal assumption of rational economic agents, where the forward guidance of relevant officials influences the expectations of rational economic agents in the market, thereby achieving early intervention in the market and enhancing the efficiency of monetary and fiscal policies. Thus, the well-known control of inflation at 2% and the observation of forward guidance from Federal Reserve officials are products of this context.

Of course, during this period, as the executor of post-Keynesianism, the Democratic government primarily addressed the impacts of the financial crisis through three arrows: massive fiscal spending and unconventional quantitative easing policies, extremely loose monetary policies, and increasingly tightening financial regulatory measures, helping the U.S. to recover from the financial crisis. The story has now brought us to the present.

The Return of American Neoliberalism Under Trump's Leadership, with Web3 Taking Up the Banner of Financial Innovation in the New Cycle of the U.S.

Looking at the evolution of mainstream economic theories in the United States, we can easily see that this has been a continuous exploration of the relationship between government and market, influenced by different historical events, with policies oscillating between government and market. The theories that emphasize the former highlight the effects of government intervention in the economy, while those that emphasize the latter stress the efficiency of market resource allocation. Considering Trump's life experiences and the stage of his important worldview formation coinciding with the low tide of Keynesianism in the 1970s, it is understandable that Trump wants to use similar strategies to help America become great again.

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

• Large-scale fiscal stimulus bills and quantitative easing policies have plunged the U.S. into a debt crisis;
• Protective policies for Silicon Valley's high-tech industry have caused resource misallocation, excessively distributing resources to high-tech industries while completely abandoning traditional industries, weakening American manufacturing;
• The significant information asymmetry resulting from government intervention has led to horizontal capital redistribution between different industries, widening the wealth gap across industries and exacerbating inequality.

Therefore, in this context, I believe that Trump's cryptocurrency launch just two days before officially taking office is not merely for the purpose of wealth accumulation but aims to convey a signal: he hopes to establish a tone for Web3 to become the core battleground for a new wave of financial innovation in its deregulated supply-side reform process. The benefits of this approach are also quite evident:

1. It can bypass the constraints of the complex interest groups formed in the traditional financial sector by the Democratic Party over many years;
2. The open and transparent trustless characteristics of the Web3 technological paradigm align with neoliberalism, as clearing all authoritative organizations' interventions and allowing the market mechanism to adjust benefit distribution will better promote the practice of neoliberalism;
3. Currently, most assets in the Web3 world are still priced in dollars, so promoting related assets is also of positive significance for maintaining the dollar's hegemony;
4. The anti-censorship characteristics of Web3 make capital flow more efficient and can bypass the financial policy restrictions of other sovereign countries, fully leveraging America's financial advantages.

Of course, the shocks caused by this approach are also evident. The most direct negative impacts will certainly be similar to those of 2008, and they will inevitably be greater and more far-reaching than the 2008 financial crisis, with higher systemic financial risks and vertical wealth redistribution between the rich and poor being unavoidable. However, the time frame for these risks to materialize will certainly be medium to long-term. In conclusion, I am very interested in the direction of financial innovation based on Web3 and traditional American industries over the next two years and will continue to keep an eye on it. Interested parties are also welcome to discuss with me.