Crashed
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The result by the summer of 2016 was a remarkable inversion. Though behind the scenes oligarchic megadonors were hard at work stoking the flames of right-wing radicalism, America’s name-brand corporations no longer wanted to be associated with the Republicans. When Romney won the party’s nomination in 2012, the money men had flocked to the party. Corporate America lined up to sponsor the Republican convention in Tampa. In 2016 no big names in American finance wanted to be associated with the platform from which Trump would give his apocalyptic acceptance speech. Even if some of the Wall Street top brass felt loyalty to the GOP, they could not stomach Trump and did not want to risk insulting their clients or their workforce. It was a matter of business culture. As one PR adviser commented: “Any corporation will look at this from the perspective of whether or not they would want their CEO sharing a stage at Davos, Aspen or Sun Valley with the Republican nominee. If the answer is no, they won’t be going to Cleveland.” Remarkably, the consultant felt necessary to explain: “The risk of violence in the convention,” between pro- and anti-Trump protesters, “is secondary as security will be strong inside the perimeter.” America’s incipient civil war atmosphere was less of a concern than the question of “whether Mr. Trump and the ideas he . . . represents are homogenous with a company’s brand and business plan.”28 No one wanted images of “Confederate flags waving over corporate brands.”29
And the 2008 financial crisis was on the mind not only of Sanders supporters. In the pages of the Washington Post, former Treasury secretary Hank Paulson put the question: “What would have happened if a divisive character such as Trump were president during the 2008 financial crisis? . . . The only reason we avoided another Great Depression was because Republicans and Democrats joined together to vote for the Troubled Asset Relief Program.”30 In fact, as Paulson knew firsthand, the bipartisanship of 2008 had not come easily. Divisions within the GOP had almost derailed the Bush administration’s efforts to contain the global bank run. It was the Bush White House and the Democrats, not their Republican counterparts in Congress, who carried the unpopular crisis-fighting measures. Now, Paulson warned: “we are witnessing a populist hijacking of one of the United States’ great political parties. The GOP, in putting Trump at the top of the ticket, is endorsing a brand of populism rooted in ignorance, prejudice, fear and isolationism.”31 This derailment of one of America’s ruling political parties posed a threat that was no less than systemic. For Paulson this left only one choice. He called on his fellow Americans to back Clinton.
In fairness, Trump might have countered by pointing to his track record. In 2008 he had vigorously applauded the bailout. But Trump in 2016 had no desire to remind his supporters of that. “Candidate Trump” was no longer the high-rolling New York wheeler-dealer of 2008. He had morphed into something altogether darker. The man running his presidential campaign was Steve Bannon, the sulfurous impresario of Breitbart and self-proclaimed “Leninist” of the 2013 shutdown. He was only too happy to take up Paulson’s challenge. In Bannon’s dark vision of American history, the moment on the morning of September 18, 2008, when Paulson and Bernanke confronted President Bush with the need for a massive bailout marked a new epoch, what Bannon called the “fourth turning,” the opening of an apocalyptic phase of struggle.32 On the morning of September 18, 2008, the United States had come close to losing its soul. For Bannon, the mission of the Trump presidency was to seize back control from the globalist elite. As the extraordinary final TV spot of the Trump campaign declared: “It’s a global power structure that is responsible for the economic decisions that have robbed our working class, stripped our country of its wealth and put that money into the pockets of a handful of large corporations and political entities.”33 The images accompanying the voiceover put faces to that global power structure: George Soros, Fed chair Janet Yellen and Lloyd Blankfein of Goldman Sachs. From the richest businessman ever to run for president, it was a remarkable antibusiness message. It was also the most transparently anti-Semitic campaign spot in recent history. Whether one agreed with Bannon or not, there was no denying that in the decade since the crisis began, American politics had traveled a long way.
Back in 2007, former Fed chair Alan Greenspan had been asked by the Zürich daily Tages-Anzeiger which candidate he was supporting in the upcoming presidential election. His response was striking. How he voted did not matter, Greenspan declared, because “(we) are fortunate that, thanks to globalization, policy decisions in the US have been largely replaced by global market forces. National security aside, it hardly makes any difference who will be the next president. The world is governed by market forces.”34 This was the mantra of an age of globalization without alternatives. Of course, Greenspan didn’t simply approve of a world governed by market forces, he had done as much as anyone to create it. As Fed chair he had made the markets into the ultimate arbiter of American economic policy. In the early years of the Clinton presidency, he had helped to shepherd the Democrats into a new partnership with Wall Street, thus further limiting the political alternatives on offer. Globalization was not a natural process, opposed to politics. It had been shaped since the 1940s by an alliance of America’s politicians, business elites and policy experts like Greenspan. The election of 2016 revealed how severely the crisis of 2008 had shaken that alliance and the world it had fostered. Most fundamentally, the crisis had exposed the deep unreality of Greenspan’s conception of a world governed by markets. As the crisis revealed, government by market forces was at best a fragile condition. As the global financial system imploded it was the markets themselves that needed governing, by state action on a gigantic scale. And that meant that who governed and where they obtained their political support was not incidental. Elections and party politics did matter. Indeed, faced with the choices in 2016 even Alan Greenspan was no longer indifferent. Unlike Paulson he could not bring himself to endorse Clinton. But he did warn journalists that the “economic and political environment” was the worst he had “ever been remotely related to.” He was deeply concerned that “crazies” risked undermining America. And contrary to his confidence ten years earlier he now admitted that “politically, I haven’t a clue how this comes out.”35
The Trump campaign may have seemed crazy, but it was not asleep at the wheel. Online media immediately hit back. “Who’s Greenspan calling crazy?” pro-Trump websites demanded to know. And then they turned the tables on the former Fed chair and his successors. Were Trump’s policy positions “[c]razier than negative interest rates? Crazier than paying banks to keep loanable funds in sterile depository accounts at the Fed? Crazier than having the Fed buy up trillions in government debt, remit the interest payments back to treasury, and then count that as revenue to the federal budget?”36 If all of this now passed for normal monetary policy, was their candidate crazy for denouncing the Fed for fueling a “false economy” and an “artificial stock market”? With the Fed balance sheet expanded to $4.4 trillion in pursuit of a full employment target mandated by legislation passed in the days of Jimmy Carter, could one seriously deny that the economy was politicized?37 Were the Trump and Sanders campaigns crazy or simply stating what should have been obvious: the fiasco of the project of Greenspan’s generation. Financial globalization that Greenspan and his ilk had worked so hard to institutionalize as a quasi-natural process had been exposed as just that, an institution, an artifact of deliberate political and legal construction with stark consequences for the distribution of wealth and power.
II
Disturbing as they were to the status quo, in the summer of 2016 the most common response to the Trump and Sanders campaigns was to dismiss them as a passing spook. Once Clinton had knocked Sanders out, she would beat Trump by a landslide. While the alt-right continued to fly the flag, Republican donors shifted their money from the presidential campaign toward House and Senate races with a view to ensuring that as president, Hillary Clinton would face a solidly hostile Congress. Only the inner core of Trump’s campaign and the au
dience of Fox News, swaddled in what the mainstream denounced as “alternative reality,” continued to believe in victory. On election night, even as the results swung Trump’s way the mainstream media could barely hide their disbelief and dismay.38 Within hours the recrimination and finger pointing began. It was the white working class and the racists who had rallied to Trump. Women and minorities had failed to turn out for Clinton. Or, it was down to Russian meddling. There was a global alignment of forces against liberalism. President Obama himself weighed in to declare that Trump, like Brexit, was an expression of protest against globalization.39
In fact, a deep dive into the poll data showed that Trump’s voters were better off than the average American.40 The voters with the lowest incomes—overwhelmingly minorities—continued to vote Democratic. But a detailed accounting of the electoral statistics did show a significant shift to the Republicans among white male voters with less than a college education. It was less immediate misery than anxiety about the future that drove the Trump vote, fears that in the white population were associated with hostility to Latinos and black Americans, and among men with hostility to upwardly mobile women.41 Trump improved on Romney’s miserable tally in the Rust Belt states. Dog-whistle racism and nationalism solidified this constituency. Even an issue such as trade was saturated with racial markers.42 In one advertising spot after another, the face of the American worker displaced by foreign imports was that of a burly white man in a hard hat. And campaigning mattered. Concentrating their effort where it counted, the Republicans put in relentless legwork and media time in key midwestern states that the Democrats considered theirs by right. The complacency, the refusal to countenance the reality of Trump’s appeal went deep. The Democrats offered nothing to counter Trump’s manufacturing “cargo cult.”43 In answer to Trump’s crude appeals to white male nationalism, Clinton offered anodyne conformity to the polite conventions of corporate globalism. That did not play with the 7 million Americans who had voted for Obama and now shifted to Trump. They were looking for a candidate who did not appear to represent the establishment. Though they constituted only 4 percent of the electorate their votes were enough to hand Michigan, Pennsylvania and Wisconsin to the Republicans, rendering Clinton’s huge tallies in New York and California irrelevant. What the Democratic operatives failed to understand was that the race was theirs to win, not to lose.44 Clinton was running to succeed a two-term Democratic presidency. A change was in order. The economy might not be the disaster that Trump suggested, but it was not booming. To overcome these handicaps, Clinton needed to energize the Democratic base. That she utterly failed to do.
In the aftermath, the shock of Trump’s election produced a state of confusion and stunned puzzlement reminiscent of Brexit. If Donald Trump had been elected president, who actually ruled America? Surely some branch of the establishment would intervene to constrain or redirect this aberrant popular choice.45 The idea of the “deep state” no longer belonged to the realms of marginalized conspiracy theory or radical critique; it was mainstream media discourse and it influenced the Trump team themselves, who circulated memoranda on which bits of the deep state they would have to do battle with first.46 With the FBI and the CIA sifting through the evidence of Russian interference and with Trump seemingly bent on picking a fight, it was from the security apparatus and law enforcement that the pushback was expected. But in truth the entire establishment of the United States had lined up against the president-elect. In August 2016 the Wall Street Journal contacted every single surviving member of the president’s Council of Economic Advisers back to the days of Richard Nixon—all forty-five of them. Though twenty-three were Republican appointees, none would endorse Trump.47
Trump did not back down. If there was one thing he had been elected to do, it was to stir things up. This meant conflict, the more and the noisier the better. He was set on his agenda of economic nationalism. It wasn’t even a choice. He simply did not know any different. In December 2016 he intervened at Carrier, an Indianapolis manufacturer of furnaces and air conditioners, to persuade them to keep one thousand jobs in the United States. The state of Indiana, where Trump’s vice president, Mike Pence, was governor, stumped up millions in tax rebates. Company spokesmen helpfully announced that they had confidence in Trump’s promise to reform the corporate tax code and to improve business conditions in the United States. Then the president-elect jetted in to Indianapolis to hail his first economic policy achievement and to reveal another reason why United Technologies, Carrier’s parent, might have wished to cooperate. “Companies are not going to leave the United States any more without consequences,” Trump declared menacingly. “Not going to happen. . . . [L]eaving the country is going to be very, very difficult.”48 Or as he tweeted later that weekend: “Any business that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the U.S. without retribution or consequence, is WRONG!”
For conventional commentators it was jaw-dropping. Did the president-elect not understand that the success of American business depended precisely on their ability to deploy labor and capital globally? As several commentators remarked, his threatening tone was “more like the populism of Hugo Chavez than even something Bernie Sanders would say. It’s the kind of threat that would find its ultimate expression in currency controls—that favored instrument of economic dictators around the world.”49 Had a left-winger engaged in such provocation, barring intervention by the Treasury and the Fed, the markets would surely have plummeted. But nothing of the sort happened in the wake of Trump’s election. Trump was a challenger, but not all challengers are alike. Among Democratic voters deep political grief went together with economic gloom. But what was no less remarkable was the reaction on the other side. Republican supporters of all kinds—from regular voters to small businesses and traders in the financial markets—exploded with new optimism.50 It was somewhat embarrassing to bigwigs on Wall Street who thought the new president was incompatible with their “brand values,” but bank shares were among those making the biggest gains. Trump liked to bang on about abolishing Dodd-Frank. If that happened it would be good for the banks, at least in the short run. Health-care stocks surged as markets anticipated a rollback of Obamacare and its cost cutting. There was also a bump in infrastructure stocks. Meanwhile, bonds sold off as the prospect of Trumpflation made it all the more likely that the Fed would raise rates.51
And this “Trump bump” was only confirmed when the president set about recruiting a team. He kept loyalists and ideologues around him. He made no concessions on substance of policy, but he widened his coalition by stocking his cabinet with wealthy corporate managers and generals. The most astonishing thing, given the menacing rhetoric of his final attack ad, was the return of Wall Street. Trump supposedly canvassed Jamie Dimon of J.P. Morgan for Treasury secretary before plumping for the obvious alternative, Goldman Sachs. Both the number one and number two positions at the Treasury were to be filled by men—Steve Mnuchin and Jim Donovan—with Goldman Sachs pedigree. Dina Powell, who moved to the influential assistant position at the White House, had formerly headed the bank’s philanthropic efforts. National Economic Council director Gary Cohn was formerly Goldman’s president. Meanwhile, to head the Securities and Exchange Commission, Trump’s team proposed a partner from Goldman’s main law firm, Sullivan & Cromwell. There was some anxiety from the White House chief of staff about the optics, but that was assuaged when Donovan withdrew.52
To a conventional programmatic political mind this was a flagrant contradiction and suggested that the establishment was reasserting control. But it was not clear whether Trump understood programmatic policy debate in the conventional sense. What Trump did understand, or at least what he inhabited, was a rawer world of power, a world dominated by a single logic: bully or be bullied. As one commentator put it, Trump viewed the world as a “kind of Manhattan real estate market writ large, a vicious sna
ke pit where the strong and hungry eat the weak and soft.”53 From this point of view, the fact that Trump had criticized the leaders of Wall Street then hired them as his subordinates was not a sign of contradiction or self-subversion. It was a sign of his triumph. Trump’s populism revolved not so much around policy as around the pure realization of power. He, Trump, was not only a successful businessman, he was also famous and had great TV ratings. He could challenge the establishment in his electoral campaign, pillory the chair of the Fed and demonize the CEO of Goldman Sachs and win. Having won, he could then audition Jamie Dimon of J.P. Morgan for Treasury secretary and reject him in favor of a minor Goldman Sachs alumnus who was more to his liking. If you could do all these things, you clearly were king of the hill, all the better for being king by popular acclamation. That is all Trump needed and it was a story to which he returned obsessively.
The revolving door that feeds government in America regularly rotates between public service and the corporate world. In firms like Goldman Sachs, the rotation is de rigueur for senior figures. It is not easy for a patriotic American to turn down an invitation from the White House to serve. But why, one has to ask, would a senior business figure be willing to be associated with such an administration? To which the simple answer is that Trump’s victory changed everything. His objectionable personality and outlandish policy proposals now had to be weighed against the more basic political question of who would do what for whom.
III
When it came to governing, it was not easy to fashion a coherent program out of such a mixed coalition. But there was one thing on which the Trump administration and the Republicans in Congress could agree: overturning the Obama legacy. In this sense, after a campaign shaped by the aftereffects of 2008, the first phase of the Trump administration was also molded by the legacy of 2008, but in negative. The first twelve months of the Trump presidency offered an audit on the robustness of the state-building project pursued by the Democrats since the crisis. How much of it would stand up in the face of the onslaught of a Republican president and a Republican Congress? In 2008, pondering the fiscal track record of the George W. Bush administration, Brad DeLong had wondered what was the right strategic and tactical course for the Democrats, “when there is no guarantee that any Republican successors will ever be ‘normal’ again.”54 Nine years on the question was more pressing than ever. Since 2009 the congressional Republicans had been waging relentless political war, first against the stimulus, then the Affordable Care Act, also known as Obamacare. Twice in 2011 and 2013 they had taken the debt ceiling hostage. Now, with control of both the presidency and Congress, what would they do?