Many of those supporting Donald Trump for President base their support on his record as a successful businessman. But how did Trump amass his financial fortune? A closer look reveals that Trump is, in fact, the perfect personification of the current state of American capitalism -- an economic system that is based heavily on three strands of capitalist practice that today depart radically from the idealized version of the self-made entrepreneurial form. Trump’s record as a business executive conforms closely to all three strands.
The first is patrimonial capitalism. This term was introduced by Thomas Piketty in his book Capital in the Twenty-First Century which charts the long-term trajectory of inequality in capitalist societies. His analysis concluded, as the term suggests, that those who dominate and direct our economy base their wealth increasingly on inheritance. It is largely family income and wealth that determines who will occupy the capitalist class rather than merit. This does not mean that the principle of meritocracy is irrelevant as it does provide, if nothing else, a powerful legitimizing ideology along the lines of “I was born on third base, so I must have hit a triple”.
Trump fits squarely into the patrimonial model as his father, Fred Trump, amassed a net worth of at least $200 million and Donald inherited somewhere between $40 and $200 million. Donald also benefited throughout his business career from a long series of loan guarantees underwritten by his father.
Second is crony capitalism. This refers to the close relationship between capitalists and government officials in which said officials provide capitalists with various favors (e.g. abatements, incentives, re-zoning, etc.) that translate into private profit. Donald learned the lessons of crony capitalism from his father Fred who developed powerful political connections enabling profitable opportunities in the building of public housing. Donald has built on those connections and that strategy throughout his life. This has included relationships with the City of New York for tax abatements, efforts in Bridgeport CT to have existing businesses condemned, the use of eminent domain in numerous locations to obtain property, and obtaining casino licenses in Atlantic City. Trump has been quite open about his ability to make economically useful connections with any political official, and his “pragmatic” campaign contributions to both parties reflect this practice.
Opportunities for crony capitalism have increased under the neoliberal supply-side economic development model that privileges the needs of capital over the needs of workers and communities. As states and localities are charged with building favorable business climates for capital investment, and the number of so-called “public-private partnerships” increase, government favors can be rationalized as contributions to job creation.
The third outstanding feature of the contemporary US economy is debt-driven capitalism. Trump proudly has proclaimed himself “the king of debt” and he claims he “made a fortune out of debt”. He has used what is now a common business practice that was the subject of a recent story in the New York Times on Trump’s business record in Atlantic City: “…even as his companies did poorly, Mr. Trump did well. He put up little of his own money, shifted personal debts to the casinos and collected millions of dollars in salary, bonuses and other payments. The burden of his failures fell on investors and others who had bet on his business acumen.” A variant of this model, sometimes described as “vampire capitalism”, is the standard operating procedure for the private-equity firms which gained national attention when Mitt Romney was running for President. As reported during that last presidential race: ”Borrowing lots of money and incurring bad debts is not how real businesses make money in a normal world. But we don’t live in such innocent times. Modern American capitalism is rife with sophisticated financial intermediaries who exploit flaws and complexity in the system, as well as insider connections, to make profits off of predatory behavior”
So when people hold up Trump as an exemplary example of business acumen, it must be put in the context of U.S. capitalism more generally and the larger systemic failure of our political economy that concentrates wealth in an oligarchical fashion, allows government to be captured by narrow corporate interests, and economically rewards those who use financial sector debt for short term gain.