by Adam Tooze
If someone had written a script as to how an economic crisis and democratic decay would lead to a nationalist backlash in the United States, this denouement might have seemed a little cartoonish. But this was no script. It was real, or at least it was “reality.” The man giving the speech was the same property tycoon and TV personality who had helicoptered onto the Turnberry golf course in Scotland to revel in Brexit a month before. Donald Trump was running for election as president of the United States on the Republican ticket against Hillary Clinton. Trump’s closest confidante was his daughter Ivanka. And if you liked her convention outfit, Macy’s department store was promoting her clothing line on Twitter.2
The following day, during a press conference in the Rose Garden, President Obama attempted to restore a sense of normality. “[T]his idea that America is somehow on the verge of collapse, this vision of violence and chaos everywhere,” the president told the press, “doesn’t really jibe with the experience of most people. I hope people the next morning walked outside and birds were chirping and the sun was out, and this afternoon, people will be watching their kids play in sports teams and go to the swimming pool and folks are going to work and getting ready for the weekend. And in particular, I think it is important, just to be absolutely clear here, that some of the fears that were expressed throughout the week just don’t jive with the facts.”3
In July 2016 Obama’s riposte seemed to many like a welcome dose of common sense. With hindsight, the president’s lines talk about “chirping” birds and kids enjoying a long, hot American summer read differently. They remind us of the complacency that would cost the Democrats the election. The Clinton team did not take seriously the view of modern America summoned up by their opponent. On November 8 Trump imposed his reality on theirs. Though Clinton ran up huge numbers in New York State and California and won the popular vote, it was Trump who gained a slender majority of the electoral college and would become the forty-fifth president of the United States.
It was the most disorienting event experienced by the American political class in generations. The unthinkable had happened. The Democratic establishment had been confident about 2016. Admittedly, since 2008 congressional elections had not gone well. But 2012 entrenched the Democrats’ belief that the presidency was theirs for the taking.4 Under their stewardship America had weathered the crisis. As Americans returned to postcrisis normality, the inevitable dominance of the more modern and diverse Democratic Party would make itself felt. American society had deep problems, no doubt. The economy was not running at the speed they would have liked. But once Clinton and the latest generation of Democratic Party technocrats got back on track, there was nothing that could not be fixed. Obama’s Affordable Care Act and Dodd-Frank were starters. What America needed was more of the same. Against this, what did the Republicans have to offer? Not only was Trump personally unfit for high office but his dark vision of American crisis was out of touch with reality.
As it turned out, 2012 had been misleading. Obama ran as a moderately popular incumbent, and his Republican opponent, Mitt Romney, a Mormon governor of Massachusetts with a much-trumpeted track record in venture capital, could hardly have been less well suited to harnessing popular discontent. Four years later Obama was out of the picture and the Republican field was wide open. As a result, the presidential race of 2016 turned out to be more about the financial crisis of 2008 than 2012 had been. The upshot was explosive and unpredictable.
I
The most obvious mark of the financial crisis of 2008 on the election of 2016 was the fact that Bernie Sanders was a serious contender for the Democratic Party nomination. Sanders wasn’t even a member of the party. He was a self-declared democratic socialist. He was a confirmed foe of Wall Street. In 2008 he had voted against TARP. He called for the big banks to be broken up. He wanted bankers jailed and a return to New Deal–era banking regulations. The spirit of Occupy energized his troops. With Independents and young voters he was wildly popular.5 The fact that Sanders was viable as a candidate reflected the finding of opinion pollsters that among American voters under the age of thirty, more had a positive view of socialism than of capitalism.6 The anger of 2008 was still very much alive and Sanders fanned it. Hardly a rally went by without crowds shouting their indignation at the bailout. Regular Americans were still struggling back from the recession. As Sanders pointed out in a typical flourish in September 2015, applauding the Fed’s decision not to raise interest rates: “At a time when real unemployment is over 10 percent, we need to do everything possible to create millions of good-paying jobs and raise the wages of the American people. It is now time for the Fed to act with the same sense of urgency to rebuild the disappearing middle class as it did to bail out Wall Street banks seven years ago.”7
Harping on the historic injustice of 2008 not only played to “Bernie’s” base. It was an excellent weapon with which to beat the front-runner, Hillary Clinton. Clinton was the consummate insider. She was a former secretary of state and senator for New York, and as such irredeemably entangled with Wall Street.8 By the spring of 2016 Clinton and Sanders were dueling over Dodd-Frank. Sanders wanted to go back to the decisive moment in 2009 and do it right, to break up the banks. Clinton’s answer was that Dodd-Frank should be rigorously enforced. This teed up Sanders to ask whether Clinton’s reticence had anything with the $600,000 in fees she had collected giving speeches for Goldman Sachs. Would she release the transcripts?9
For the Left, Clinton’s Goldman Sachs speeches were what her Libya e-mails were for her opponents on the Right: a further sign of her untrustworthiness. How deeply was Clinton entangled with the bank now better known as the “vampire squid”?10 Even the New York Times called for Clinton to release the text of the speeches. Weighing the issue, her campaign managers decided that Clinton’s words were not, in fact, fit for public consumption. She would look too friendly to the banks.11 We know this because starting in July, as she closed in on winning the nomination, internal memos from the Clinton campaign began to be dumped en masse in WikiLeaks folders. Who, in fact, compromised the security of the Democratic Party machine was to become a matter of complex technical and legal dispute.12 But at the time the conviction rapidly took hold that it was down to hackers with ties to Russia.13 Was the mounting confrontation with Putin, which had reached a new pitch in intensity over Ukraine and Syria, blowing back on the United States, and on Clinton in particular? Behind the scenes America’s intelligence agencies scrambled to uncover the extent of Russian interference in America’s presidential election. On the basis of sources inside the Kremlin they were forced to conclude that given Clinton’s well-known hostility to Putin’s regime, Moscow was doing what it could to derail her campaign. Even if the Russians could not change the outcome, they would do their best to undermine the legitimacy of America’s already fragile political system. Moscow was serving notice that two could play at the game of regime change. By the fall Obama was seriously weighing his options, including sanctions that would, in the words of an anonymous administration source, amount to “cratering” the Russian economy.14 That scenario did not unfold, because Putin pulled back. But it was clear that this would be no ordinary election. Quite how unusual it would be was becoming clear on the Republican side.
Whereas the battles within the Democratic Party had a clear-cut, Left-versus-Right logic, and the establishment maintained its grip, what was happening to the Republicans was more disorientating. The GOP was out of control. In truth, the party had never recovered from the shipwreck of the late Bush presidency, the shock of 2008 and the Tea Party mobilization triggered by the financial crisis. The splits within the party that had precipitated the congressional budget crises of 2011 and 2013 were wider than ever. In 2013 the shutdown was called off as default loomed, but the Right had had their taste of blood. First, in June 2014 they unseated the leader of the House, Eric Cantor, in a primary. Then, in October 2015, the ill-fated John Boehner was ousted as House Speaker by a mobilization
of the right-wing Freedom Caucus.15 With the party in turmoil, the establishment candidates who had been expected to dominate the presidential primaries—figures like Jeb Bush—rapidly faded. It was the darlings of the Right who surged to the fore. The “dark money” of the billionaire donors, led by the Koch brothers, swung behind Texas senator Ted Cruz.16 But it was Trump who took the votes of the Republican base by a majority of almost two to one.17
If Jamie Dimon quipped that to make sense of Dodd-Frank one needed the services of a lawyer and a psychiatrist, the same is no doubt true of the business of deciphering Donald Trump. But historians can contribute too.18 Trump offered to a bewildered present a throwback to an earlier era. Born in 1946, the same year as Bill Clinton, Trump would take office at seventy years of age, recycling a rancid version of the baby boomer narrative, which in the 1990s had still seemed fresh. Trump’s racial attitudes reflected the animosities of the era of civil rights, desegregation and New York in the 1970s. His boorish manners and sexism echoed the Manhattan party scene of the 1980s, when bond traders toasted one another as “big swinging dicks.” The sense of national crisis that drove his campaign was a reflux not so much of the recent past as of the first moment when modern Americans felt the world changing around them—the late 1970s and early 1980s. The trauma of defeat in Vietnam, America’s urban crisis and angry Japan bashing—thirty years on Trump was still harping on those fears, but now transposed onto new enemies: China, Islam and undocumented Latino immigrants.
His main shtick was that he was a businessman, a deal maker. And because his business was real estate, Trump lived the American business cycle close up. As Hyman Minsky, the legendary analyst of financial crises, observed already in 1990, Donald Trump was the very epitome of a Ponzi scheme capitalist, living hand to mouth by borrowing against the expected appreciation of his assets.19 As a result, crises punctuated Trump’s career. He was hit hard by the early 1990s recession, almost losing his business. By 2008 he was less vulnerable, having diversified into media and branding. But his real estate exposure was still significant. Indeed, he was seeking to increase it. In 2006 he started a mortgage brokerage and announced plans to open a mortgage lending business. Luckily for Trump, neither got off the ground. By 2008 his casino business was failing again and would ultimately close. But Trump’s real vulnerability was a gigantic condo development in Chicago.20 It was a spectacular project, the tallest building to be built in the United States since the Sears Tower, and sales had originally gone well. But in 2008 Chicago condo sales stopped dead. By the fall it was clear that Trump and his business partners were in trouble. Since his bankruptcies of the 1990s, Trump was no longer on good terms with the major American banks, so the Chicago project got its funding mainly from Deutsche Bank’s North American real estate arm. In the first week of November 2008, as Barack Obama celebrated his election victory with his adoring Chicago base, Deutsche and Trump went to war. Deutsche sued for $40 million, for which Trump was personally liable. Trump responded with an astonishingly audacious legal broadside. He claimed that the greatest financial crisis since 1929 constituted force majeure, akin to a natural disaster. He therefore demanded more time for the project to pay off. Deutsche’s own suit was typical of a predatory and dangerous lender that had helped to bring on the crisis. Trump’s countersuit claimed $3 billion in compensation for the damage it was causing to his reputation. It was pure legal swordplay, but it bought him the time he needed.
In a tight spot Trump is nothing if not pragmatic, and he was certainly not one to be squeamish about the maxims of free-market economics. Faced with the 2008 crisis he knew that American business needed all the help it could get. He had decades of experience working the subsidies available from American government. He liked the cut of Obama’s jib; 2009 was not his moment to get on the anti-Obama bandwagon. As he remarked to a bemused Fox News host, commenting on an early Obama appearance: “I thought he [Obama] did a terrific job. . . . This is a strong guy knows what he wants, and this is what we need. . . . [I]t looks like we have somebody that knows what he is doing finally in office, and he did inherit a tremendous problem. He really stepped into a mess.” On Obama’s stimulus Trump was equally unabashed: “Well, something had to be done. And whether it’s perfect or not, nothing is perfect. And it’s a whole trial-and-error thing. . . . It’s a very, very tough—we are having . . . we’re having the worst year, the worst couple of years, since the Great Depression. And you mentioned the early ’80s. I mean, the early ’80s get blown away by this deal. . . . [W]hen you look at the banks, had trillions of dollars not been poured into the banks, you would have an insolvent banking system, and then you would absolutely have 1929. They did the right thing.”21 Whereas Trump was reluctantly willing to support the bank bailout, he was positively enthusiastic when it came to helping Detroit: “I think the government should stand behind them 100 percent. You cannot lose the auto companies. They’re great. They make wonderful products.” When conservative interviewers tried to deflect Trump toward the cause of tax cutting, it was an easy sell. Trump doesn’t like paying tax. But he stuck to his guns on stimulus spending. “[B]uilding infrastructure, building great projects, putting people to work” was the right thing to be doing.22
Six years on from the crisis, Trump’s enthusiasm for an activist, engaged, “strong” presidency remained. What had changed was his attitude to Obama, which had curdled from admiration to vituperative animosity. It was this that formed the bridge to the Right: not programmatic or intellectual affinity but the tabloid absurdity of the National Enquirer and the “birther” conspiracy. Despite having cultivated minority audiences early in his television career, Trump now played the race card.23 In 2013, after Romney’s defeat radicalized the right wing, Trump positioned himself ever more aggressively as a spokesman of the anti-immigration wing of the Republican Party. By 2014 he had branded the idea of building a “Wall” and had literally trademarked the slogan “Make America Great Again.” Xenophobia, nationalism and an apocalyptic diagnosis of America’s situation formed the bridge. The right wing loved Trump’s slogan, as much for what it acknowledged about the present as for what it promised for the future: America, their America, was in trouble.
If in the Republican primaries it was above all Trump’s unabashed appeal to white male voters that swung the decision, what made this worrying for the party establishment was the way this correlated with his appeal to economic nationalism. Since the 1980s the party leadership had nailed itself to the mast of globalization. The idea of NAFTA was launched by the Reagan administration. It had been crafted by Bush senior only to be carried across the line in 1993 by Clinton. In the 1990s “globalization” was a bipartisan project of the Republicans and the Rubinite wing of the Democratic Party. Their push extended not only to goods and capital. It extended to labor too. The business lobby favored immigration reform, which would give residence rights to the large and cheap workforce of undocumented migrants. Opposition to regulation of all kinds, “freedom” for labor, goods and capital were the ideological bracket that joined American business interests in a single block, from small contractors to the Davos set. There were sectors, perhaps most notably in coal mining, where this alignment did not hold. In polluting industries such as fossil fuels, opposition to globalism, the rejection of the politics of climate change and the blue-collar appeal of American nationalism fit together all too neatly.24 But those were exceptional cases. On the whole, the Republican Party preserved an uneasy truce between the nationalist base and the globalist leadership. In the 1990s the right-wing nationalist campaigner Pat Buchanan had twice threatened to undo that fragile balance. But it was the progressive breakdown of party coherence after 2008 that really tore it apart. In 2015 Trump exploded onto the scene with the alt-right squarely behind him and transformed the debate. Untouched by concern for economic doctrine, his updated version of 1970s Japan bashing energized the party, promising to keep “illegals” out and to bring blue-collar jobs back to America. Following th
eir new tribal leader, Republicans abandoned free trade en masse. The percentage saying that free trade agreements were bad for America surged from 36 percent in 2014 to 68 percent two years later. By that point only 24 percent of Republicans were still willing to fly the flag for free trade.25
For the Republican elite, as Trump stormed to the nomination, it was bewildering. “The pillars of the Republican economic agenda have completely collapsed into dust,” a member of the American Enterprise Institute acknowledged. “They’re gone, at least for this election.”26 The US Chamber of Commerce did not go down without a fight, openly challenging the Republican nominee on the issue of trade. But to no avail.27 Trump and the protectionist agenda triumphed.