Have President Trump and the Davos crowd come to an accord?
Every year in January, business titans, government leaders and celebrities gather for the World Economic Forum in the Swiss town of Davos. It's become a stand-in for the pro-globalism elites that Trump railed against. When the president first joined the event in 2018, "his trip was treated with deep skepticism, if not disdain" by the attendees, as Andrew Ross Sorkin put it in the New York Times. But this year, "there is an increasing sense that [Trump] will be accepted, if not embraced."
Other people with their finger on the pulse of the Davos crowd — such as historian Niall Ferguson and Eurasia group founder and president Ian Bremmer — made similar assessments. And, in truth, a warming between the two camps was probably inevitable.
Quite often, and certainly when Trump first entered the White House, the tension between him and the Davos crowd was pitched as a great first-principles clash between reactionary nationalism and multicultural globalism. But in truth, this was largely a war between intellectual fads — one that hid a far more important commonality between Trump and the Davos set. Namely, both sides share a basic assumption that business leaders and wealthy investors (which of course includes the Davos elites themselves) are the most important and valuable participants in economic life.
The Davos set's enthusiasm for free trade, for example, was basically a product of how well global trade liberalization worked out for them. The end of tariffs and capital controls and other barriers allowed them to shop the globe for the cheapest inputs — which largely means the cheapest labor — and thus higher profit margins. The argument was that this new era of liberalized international trade would improve the growth rates for global productivity. But whatever changes it brought in that realm were completely swamped by the changes brought to the distribution of wealth and income. Wages and jobs fell for the western working class, poorer nations were trapped in permanent roles as low-end providers of cheap inputs, and all the actual benefits of higher productivity were siphoned into the pockets of the global elite.
Trump used the rage set off by these changes to his advantage in the U.S. election of 2016. But his economic vision has never had any coherent strategy for returning power to everyday workers. Trump's trade war is essentially a showman's wrestling match — a slugfest devoid of policy substance, far too shallow to have any concrete chance of rebalancing the money flows and scales of power. As appalled as Davos attendees may have been by Trump's enthusiasm for tariffs and national confrontation, their own understanding of the economics was in turn far too shallow to grasp that Trump's agenda posed no actual threat to them.
"To the surprise of many Davos regulars, the economic results [of Trump's economic agenda] have yet to prove as disastrous as they expected — and, at least in the short term, have seemingly proven to be quite positive," Sorkin observed. "Quite positive" for the Davos attendees themselves, of course. But you get the point.
Similarly, Trump's indifference to deficit spending does not translate into any serious proactive desire for public investment or full employment policy — it merely opened the door for progressives and Democrats to shoehorn public investment into spending bills negotiated with the Republicans. Trump's desire for lower interest rates stems from a real estate tycoon's understanding of monetary policy: He does not realize how difficult it is for lower rates to translate into big wage and job growth numbers, once the overall structure of the economy has been sufficiently tilted to favor the wealthy and the ownership class. And Trump is happy to champion stock market numbers as a valid measure of economic success, even though the stock market's gains often come at workers' expense.
But the key point on which Trump and the Davos set can find common ground is, of course, Trump's 2017 tax cut. That legislation was built around the idea that government taxes on corporate profits were a weight dragging down the economy's most valuable players, and the way to juice growth was to remove the barriers that stand between wealthy owners and their corporate profits. Economically, it didn't work out that way, but the Davos crowd doesn't mind: "On behalf of the business leaders here in this room let me particularly congratulate you for the historic tax reform," Klaus Schwab, the founder of the World Economic Forum, told Trump during his 2018 visit.
And like any good right-winger, Trump's administration has been culling regulations left and right, particularly when it comes to protections for the environment and protections for workers. Instead of being forced to spend their revenue on higher pay, more benefits, or efforts to clean up their pollution and cut their carbon emissions, corporate titans are now more free to deploy that capital as they see fit — as often as not, right into their own pockets.
"There are a lot of masters of the universe who think [Trump] may not be their cup of tea, but he's been a godsend," Bremmer told the Times. And in an interview with Yahoo Finance, Ferguson agreed the forum's attendees are "begrudgingly embracing" Trump. "The dirty little secret of Davos 2020 is that they all need him to get re-elected."
In truth, the signs were always there. As much as reporting from the first Davos forum after Trump's election may have highlighted the attendees shock and dismay at the 2016 results — and even if Trump was booed during his 2018 visit — the fact is that, even in January 2017, business elites were already salivating over the prospect of Trump's coming tax cuts and deregulatory push.
Reporting from the Times, confirmed by Ferguson, also suggests a big motivating factor in the thawing relations is who Trump may well be running against in 2020. Unlike the billionaire-friendly Hillary Clinton in 2016, Trump's Democratic opponent this time around may be a genuine barnstorming left-wing populist. "Nobody wants to say that out loud," Ferguson said. "But I think that the consensus view is that [Trump] will be re-elected, and that probably is a good thing if the alternative is — shudder — Bernie Sanders or Elizabeth Warren." Yes, Ferguson literally said "shudder" there.
The Davos crowd may grate at Trump's nationalist rhetoric; they may be horrified by his reactionary cultural stances; they may even disagree with him on climate change. But at the end of the day, they know who will defend their place atop the mountain.
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