The political economy of Trump

Four years on from 2016. On the eve of a historic American election, it is worth asking: What did the Trump phenomenon consist of and what does it tell us about America today?

It starts, of course, with Trump himself: Narcissist in chief. Reality-TV president. Bad-boy throwback to the seamier side of the baby boom. But the president would be nothing were it not for his base: white, male, small-town Americans. In rural areas, even the women like him. Then there are Trump’s shock troops, the self-appointed citizen’s militia that rallied in 2016 to Trump’s call to “build a wall,” the heavily armed men who marched in Charlottesville in 2017. Add to them the white evangelicals, stalwarts of conservative America. In the Reagan era they were the avant-garde of a new wave. Now they are on the defensive, clinging to Trump as their unlikely defender. Trump also inspired the culture war ideologues of the right, figures such as Steve Bannon. And since 2016 he has attracted a bevy of 80 right-wing billionaires, 9% of the super-rich in America. Not the tech giants of Silicon Valley, but hedge fund types, construction, casinos and oil money. In Washington DC, Trump relies on the Republican party, most prominently Mr Mephistopheles himself, Mitch McConnell. Trump is no party loyalist. He did not come up through the party ranks. Between 2001 and 2009 Trump was a registered Democrat. McConnell’s priority is first and foremost to defend his grip on power. That depends on pleasing his donors and on securing the right-wing base which, in America’s rigged electoral districts, is the only possible threat to most sitting Senators. It is the base not the GOP leadership that loves Trump. Finally, last but not least in the Trump coalition, you have the lobbyists and interest groups of American business.

Any Republican president can expect a friendly reception from business. But big business lobbies did not back Trump strongly in 2016. They had never had to deal with a candidate who was this erratic and off-message. His economic nationalism was off-putting. Hillary Clinton seemed sure to win. It doesn’t pay to make powerful enemies.

If 2020 had gone according to plan, there would no doubt have been strong support from American business for Trump’s reelection

Then, on the night of November 8, 2016, everything changed. Power and money talk. Trump stocked his cabinets with business people. They have delivered tax cuts, deregulation, and a judiciary that will deliver pro-business rulings for decades to come. Plus, the first three years of Trump’s presidency delivered good economic news. There was a wobble in 2019 when Trump’s escalating trade war with China spooked the markets. But American business has accommodated itself surprisingly easily to the new aggressive line against Beijing. Perhaps Trump would be able to extract concessions no one else had. Meanwhile, the Federal Reserve, stepped in with monetary stimulus.

If 2020 had gone according to plan, there would no doubt have been strong support from American business for Trump’s reelection. And this would have been even more the case if the Democrats had chosen Bernie Sanders rather than Joe Biden as their candidate, something that could quite easily have happened if the virus had arrived only a few weeks later, boosting Sanders’ campaign for universal health care.

Instead, the Democrats chose Biden, the most centrist candidate available. The coronavirus delivered the most severe shock to the US economy since 1945. And Black Lives Matter protests brought out the ugliest, most polarizing side of Trump’s politics.

This is horrifying for much of America. It is also profoundly at odds with the corporate culture of big business, which pays lip service to the mantra of diversity. It was not just the Democratic Party leadership, but also the senior management of J.P. Morgan, led by Jamie Dimon himself, who “took a knee” in the summer of 2020. Joe Biden’s fundraising has surged. Organizations such as the Business Roundtable have come out in favor of new climate change initiatives that are anathema to Trump. The Chamber of Commerce, once the most reliably pro-Republican business lobby group, has declared its support for a clutch of centrist democrats in the House of Representatives.

The profound hope of a large part of the American establishment, both Republican and Democrat, is that Trump will lose and his base of support will simply fade out of existence as his older supporters die out, America reconciles itself to becoming a much more diverse society with prominent Black and Hispanic voices alongside a dwindling white majority, and the dominance of college-educated Americans in the economy and society becomes ever more pronounced.[2]

But Trump isn’t an ordinary candidate. The radical fringe of his supporters is in an aggressive mode. The plot to abduct and execute the governor of Michigan is telling. A constitutional crisis is a distinct possibility. And in light of experience it is unclear how Republicans in Congress and Republican Supreme Court Justices would respond. Both sides fear that the other aims to steal the election. In the financial markets, fund managers have taken out massive insurance against political turmoil in November by buying VIX, the so-called fear index.

You can hedge against turbulence. Hedging against a broad-based recession is far more difficult and that is what threatens if the Democrats win the White House but do not gain the Senate. In that case one should probably expect Mitch McConnell to go into unrelenting opposition. In 2009 Obama had two years to pass a fiscal stimulus and get his healthcare reforms through. Biden would be hobbled from the start. Without stimulus the outlook for the American economy and tens of millions of Americans is bleak.

Ironically, the best thing for the American economy in 2020 would be a Democratic landslide with a powerful left-wing minority, led by figures such as Alexandria Ocasio-Cortez

There is a third possibility. Biden wins. The Democrats gain Congress. And then they hobble themselves. In retrospect many see this as the bitter lesson of the Obama administration: A cabinet of reformist technocrats afraid of their own shadow. In 2020 the entire world has seen debts soar. Biden is saying the right things about green energy and healthcare. But don’t rule out the possibility of a self-inflicted disaster. Precisely because the Democratic Party has, since the era of Bill Clinton, been so closely business aligned it is shot through with dysfunctional thinking about deficits and debt.

Ironically, the best thing for the American economy in 2020 would be a Democratic landslide with a powerful left-wing minority, led by figures such as Alexandria Ocasio-Cortez, pushing for the infrastructure spending and welfare reforms that America so urgently needs. Business might squirm around regulation and taxes. One would expect a backlash from the courts. But not only would this deliver growth, but also, only such a program has the chance of actually reconsolidating American society and convincing working-class Americans that the government is for them too. Given challenges such as climate change, given America’s profound polarization, simply waiting for demography and structural change to make the right-wing base fade away is a dangerous game. It was the game the Democrats played in 2016. We know how that ended.

Adam Tooze is a history professor at Columbia University, where he is the director of the European Institute.