"There was anxiety in the thin
mountain air when the planet’s economic leaders gathered in January at Davos for
the 54th meeting of the World Economic Forum. Donald Trump had just trounced
Nikki Haley in the Iowa caucuses, all but securing the Republican nomination
for president. Haley was reliable, a known quantity. A resurgent Trump, on the
other hand, was more worrying.
The Davos attendees needed
reassurance, and Jamie Dimon, the chairman and chief executive of JPMorgan
Chase, had some to offer. In an interview with CNBC that made headlines around
the world, Dimon praised Trump’s economic policies as president. “Be honest,”
Dimon said, sitting against a backdrop of snow-dusted evergreens, dressed
casually in a dark blazer and polo shirt. “He was kind of right about NATO,
kind of right on immigration. He grew the economy quite well. Trade. Tax reform
worked. He was right about some of China.” Asked which of the likely
presidential candidates would be better for business, he opted not to pick a
side.
“I will be prepared for both,” he
said. “We will deal with both.”
Dimon presides over the largest and
most profitable bank in the United States and has done so for nearly 20 years.
Maybe more than any single individual, he stands in for the Wall Street
establishment and, by extension, corporate America. With his comments at Davos,
he seemed to be sending a message of good will to Trump on their behalf. But he
also appeared to be trying to put his fellow globalists at ease, reassuring
them that America, long a haven for investors fleeing risk in less-stable
democracies, would remain a safe destination for their money in a second Trump
administration.
But would it? As Dimon noted, for
all Trump’s extreme rhetoric in the 2016 campaign — his threats to rip up
America’s international trade agreements and his attacks on “globalization” and
the “financial elite” — his presidency, like most presidencies, proved to be
business-friendly. Corporate America wound up with plenty of allies in the
administration, from Secretary of the Treasury Steven Mnuchin, a former Goldman
Sachs executive; to Secretary of Commerce Wilbur Ross, a Harvard Business
School-educated bankruptcy guru; to Trump’s son-in-law Jared Kushner, an
aspiring Wall Street player. And the Trump administration’s economic agenda of
reduced taxes and deregulation largely suited corporate America’s interests;
JPMorgan saved billions of dollars a year thanks to Trump’s corporate tax cuts.
But Trump and those around him are
signaling that a second Trump administration would be very different. They
promise a more populist economic agenda and a more populist governing style to
match, with steep tariffs on imported goods and punitive measures against
companies that do business with China. And his team has been clear about the
fact that Trump is ready to move ahead without the blessing of the business
community. “You’ll see loyalists,” says Brian Ballard, a fund-raiser and former
lobbyist for Trump. “Wall Street’s supermen who thought they were the smartest
guys in the room? That sort of stuff he won’t tolerate.”
Scholars who have spent their
careers studying populist movements are not confused about what to expect. They
have seen this sequence of events play out before, to disastrous effect not
just on democracies but on businesses — and business leaders. If history offers
any guide, they say, it’s that the Davos crowd should be a lot more
concerned about a second Trump term.
For all the free-floating anxiety at
Davos, America’s executive class seems to be maintaining a base-line faith that
its interests aren’t really on the ballot in November — that no matter who
occupies the White House, the conditions that have kept it at the center of the
global economy for a century aren’t in any real danger. But those conditions
could easily change, and significantly.
There may be nothing executives can
say or do that would make a difference at this point. But they might want to
start considering their options. “There has been this sense among business
leaders that we can work with these people even if they sound kind of
revolutionary because they will give us some things that are useful,” says Rawi
Abdelal, a political economist and professor at Harvard Business School. “They
are missing that this is a moment of systemic danger for capitalist systems as
we know them, and globalization as we know it.”
The End of (Economic) History
For decades, America’s business
leaders got more or less what they wanted from the White House, regardless of
who occupied it. Communism had fallen, the Cold War had ended and nations
around the world were opening up and integrating. The battle of ideas was over,
presumably forever; capitalism had won. “At the end of history, there are no
serious ideological competitors left to liberal democracy,” the American
political scientist Francis Fukuyama wrote in his 1992 book, “The End of
History and the Last Man.”
History had ended before. The Gilded
Age of the late 19th century marked the last, climactic chapter of decades of
largely unconstrained corporate growth and ostentatious displays of private
wealth. Then, as now, populists protested. Depression and war came next,
accompanied by a new regulatory regime — the New Deal. Years of rapid growth
and reduced income inequality followed, but they came to an abrupt halt with
the oil crisis and recession of the mid-1970s. Free-market orthodoxy, now in
the name of “neoliberalism,” began another ascent under the Democratic regime
of Jimmy Carter and reached its full flower under Ronald Reagan’s presidency in
the 1980s.
The Democrats who followed Reagan
largely hewed to the same pro-business handbook, limiting government interference
in the economy. Corporate America, and Wall Street in particular, rarely shy in
their efforts to capture the government and deploy regulatory powers to their
own ends, found an increasingly warm welcome in Washington. They sent a steady
stream of people into positions of power in each successive administration,
while at the same time hiring armies of lobbyists and donating generously to
political campaigns and political action committees to preserve the status quo.
After Brexit — the United Kingdom’s
withdrawal from the European Union in 2016 — there could be no doubt that
history had started again. A new populist wave had already been swelling for
years, but the world’s business leaders were nevertheless blindsided by the
referendum’s passage, having vastly underestimated the growing backlash against
globalization. Stock markets around the world tanked as investors worried about
what this wave of nationalism might mean for Europe and the broader economy.
For many British businesses, the effects of Brexit have been devastating,
reducing investments, increasing costs and creating both labor and supply
shortages. Populism has continued its march ever since, with citizens around
the world seemingly eager to burn down the neoliberal global economic order.
Trump’s rise seemed to mark the
arrival of this wave on America’s shores, but his antiglobalist rhetoric on the
stump didn’t amount to much once he was in office. The business community got
the tax cuts and deregulation that it wanted, even if Trump’s public image
created problems for executives who had to answer to shareholders or employees.
After Trump’s comments defending white supremacists at the protest in
Charlottesville, Va., in 2017, a number of prominent executives resigned from
two presidential business advisory councils, forcing him to disband the groups.
Then, when Trump refused to accept the results of the 2020 election, and again
in the aftermath of the attack on the Capitol on Jan. 6, 2021, nearly 50 chief
executives, including the heads of Johnson & Johnson and Walmart, came
together to rally behind America’s democratic institutions. Still, when all was
said and done, the Trump presidency was good for business leaders, driving up
stock prices and spurring an increase in mergers and acquisitions and initial
public offerings.
Their memories of that era have
surely been made rosier by their frustrations with President Biden, who has
been a much more proactive regulator. His Securities and Exchange Commission
has issued a raft of rules constraining the conduct of financial institutions;
his Federal Trade Commission and Justice Department have begun an aggressive
antitrust crusade; and his National Labor Relations Board has pursued an
unambiguously pro-union agenda.
The Biden administration is also
notably light on former corporate executives. “Nobody there is wired into the
business world, even in seats where you would normally find them, like Treasury
or commerce,” says Lloyd Blankfein, the former chairman and chief executive of
Goldman Sachs. “And they don’t seem to want any.”
But scholars of populism warn that a
second Trump administration could be far more destabilizing to America’s
business leaders and to the larger global economic order. Rachel Kleinfeld, a
senior fellow at the Carnegie Endowment for International Peace, detailed the
many potential dangers ahead in a report last year, “How Does Business Fare
Under Populism?” Examining the recent economic histories of Hungary, Brazil and
India, she found that populist governments significantly increase volatility
and risk by using their regulatory power to tilt markets or outright take
control of businesses. The report makes for ominous reading for those
accustomed to the comfort and stability of the neoliberal orthodoxy. “The
business community here doesn’t understand what is about to hit them,”
Kleinfeld told me.
‘Massive Economic Shock Waves’
Trump has made no secret of his
intentions. Over the course of his campaign, he has outlined a radical program
of protectionism, calling for a phaseout of all “essential goods” from China,
as well as a ban on investments in China and on federal contracts for any
company that outsources labor to China. All of this would be concerning enough
for American business. But Trump has also proposed a 10 percent tariff on all
imported goods, which would amount to the declaration of a global trade war,
with other countries almost certainly retaliating with their own tariffs.
Together, these protectionist
policies would drive up the cost of goods, create sweeping supply-chain issues
and quite possibly cause hyperinflation. “We’re talking about massive economic
shock waves,” says Lisa Graves, executive director of True North Research, a
national watchdog group that studies government oversight of business. And
tariffs are just the beginning. Trump’s promise to initiate what he calls “the
largest deportation operation in American history” could be catastrophic for
employers already facing a tight labor market.
Trump’s evolving policy views are in
step with the broader populist migration of the conservative movement. Last
year, Project 2025, an effort of more than 100 conservative organizations led
by the Heritage Foundation, published a 900-page report called “Mandate for
Leadership: The Conservative Promise,” which is essentially a blueprint for a
second Trump administration. In addition to embracing radical protectionism, it
calls for the next president to reduce the power of the Federal Reserve,
limiting its ability to serve as a so-called lender of last resort for banks
and other financial institutions facing cash crunches. This would increase the
risk of financial crises, undermining confidence in the U.S. banking system and
its financial markets. “The power of the Federal Reserve to step in and provide
economic relief to stop the spread of economic chaos is what saved us in 2009,”
Graves says. To limit any internal opposition to his agenda, the report also
calls for Trump to reimpose an executive order that Biden revoked, enabling him
to fire thousands of civil servants across his administration and replace them
with political appointees.
There are other, more existential
reasons for concern, too. A hallmark of populist leaders is to tighten the
state’s grip on the business sector — a phenomenon that Ian Bassin, a lawyer
and pro-democracy activist, calls “autocratic capture.” To get a sense of how
this works, consider Hungary under Prime Minister Viktor Orban, a close Trump
ally.
Like Trump, Orban governed as a
traditional, pro-business conservative during his first term as prime minister
between 1998 and 2002, cutting taxes and lowering government spending, in part
to prepare Hungary to join the European Union. But he has been a very different
leader since returning to office in 2010. In order to consolidate and maintain his
power, he has nationalized parts of the private sector, forced banks to reissue
mortgages at more favorable rates, ordered utilities to lower prices, levied
“crisis taxes” on various industries and imposed price caps on foreign-owned
supermarkets. “Anything you were counting on by way of predictability just
disappears,” Kim Lane Scheppele, a professor of sociology and international
affairs at Princeton University and an expert on Hungarian politics and law,
told me. Along the way, Orban has made his friends and family rich, starting
investigations, blocking mergers and directing the passage of legislation to
devalue some businesses, which has made them vulnerable to takeovers by his
allies or the government.
During a recent visit to the United
States, Orban was shunned by the Biden administration but welcomed to
Mar-a-Lago by Trump. He also spoke at the Heritage Foundation, which has a
formal cooperation agreement with a think tank that has close ties to Orban’s
government, the Danube Institute. “It’s clear that Project 2025 is a direct
copy of what Orban did in 2010,” Scheppele says. “The parallels are very deep
between these guys.”
Fear of Backlash
Privately, some business leaders
and corporate executives have begun to express concern about at least some of
what they are hearing from Trump. “They are ready to be galvanized into
collective action if need be,” says Jeffrey Sonnenfeld, the founder and chief
executive of the Chief Executive Leadership Institute at Yale. “But they aren’t
going to speak out if it’s not necessary.”
It’s easy to understand their
hesitation. A number of businesses have already faced punishing backlashes from
conservatives for embracing social causes like L.G.B.T.Q. rights. And Trump
would almost certainly not hesitate to use the levers of government against
anyone who opposed him. In fact, he already appears to have done so. During his
presidency, his otherwise merger-friendly administration sued to block
AT&T’s purchase of CNN’s parent company, Time Warner, causing months of costly
delays. The Justice Department has denied that Trump’s hostility to the news
outfit influenced its decision. Either way, he is widely understood to be a
vindictive man. “I am your retribution,” is how he put it to supporters on the
campaign trail.
Speaking out could be scary. And yet
the entire global economic order might be at risk. Enlightened self-interest
typically requires businesses to stay on good terms with those in power, but
for Dimon and the Davos set today, that may turn out to be a fatally short-term
view. “The only thing we know for sure about globalization,” Harvard’s Abdelal
says, “is that it’s desperately fragile and can easily be broken.”" [1]
