The “dual economy” and the victory of Donald Trump

by Anno Hellenbroich

The U.S. presidential election of 2016 featured frontal challenges to the political establishments of both parties and perhaps the most shocking election upset in American history.

This is the introduction of a very provocative research paper that was written by a group of American Professors in January 2018. It was published under title: Industrial Structure and Party Competition in an Age of Hunger Games: Donald Trump and the 2016 Presidential Election. The study contains a detailed analysis of the last US presidential election. It overturns many clichés and it presents some interesting hypotheses, which should by studied by all leaders in the industrialized nations. The authors of the 100 page report were Thomas Ferguson, Paul Jorgensen and Jie Chen and the report was published by the Institute for New Economic Thinking January 2018. (Thomas Ferguson is Professor Emeritus at the University of Massachusetts, Boston, Director of Research at the Institute for New Economic Thinking, and Senior Fellow at Better Markets; Paul Jorgensen is Assistant Professor of Political Science at the University of Texas Rio Grande Valley; Jie Chen is University Statistician at the University of Massachusetts, Boston.)

With the help of some citations some of the key findings of the document that is based on unique statistical material will be presented in this review. The document refers to the role of the “dual economy” by illustrating the immense disparity in the living conditions of Americans; it also reviews the so called “Russian Interference” and it gives comprehensive database of ‘political contributions’ to describe the role of big investment in the party financing. The result is that conflicts within the business community normally dominate contests within and between political parties – the exact opposite of what many earlier social theorists expected, who imagined “business” and “labor” confronting each other in separate parties. Few indeed are the labor movements today that can realistically expect to control parties of their own. As a result, in countries like the US and, increasingly in Western Europe, political parties are first of all bank accounts. With certain qualifications, one must pay to play, the authors of the study conclude. Many other themes, which were played up by the press in the aftermath of Trumps stunning victory are also analyzed, f. i. the role of “dark money”, Trump’s own money input in the campaign and at what point millions of dollars were pumped into the Trump campaign and which of the companies including the silicon valley giants put in money into the election campaign in the last minute. The study also includes the raging debate on health- care and the effect it had on the Clinton campaign. But also the role and activities of the so-called  US Alt Right  (Breitbart network) are looked at.

The researchers convincingly see the developing “dual economy” and the resulting growing low wage employment as one cause for both the final winning of Trump and for the parallel emergence of Bernie Sanders (which the Democratic Party leadership in the view of the researchers suppressed).

The steady growth of a “dual economy” that locks more and more Americans out of the middle class and into a life of unsteady, low wage employment and, all too often, steep debts.  The paper draws extensively on a newly assembled, more comprehensive database of political contributions to identify the specific political forces that coalesced around each candidate. It considers in detail how different investor blocs related to the Republican Party and the Trump campaign as the campaign progressed and the role small contributors played in the various campaigns, especially that of Vermont Senator Bernie Sanders.

With a certain polemical tone the authors of the study made reference to the film “Hunger games” (2012) which got a tremendous audience  in the US and their analysis consciously evokes dark associations. “Hunger Games” refers to the movie and science fiction novel (2008) by American writer Suzanne Collins. “Hunger Games” describe a horrendous, top down, controlled society whose ruling class forces young people to play life and death games where only the winners will survive. It is a gladiatorial, roman circus view of controlling the masses by forcing them to watch their youngsters compete in the games and only survive if they win.  Obviously the researchers see the current US society which is characterized by social inequality and income disparity and its political parties as infected with a greed driven oligarchy that only works for the billionaire class and its minions. Professor Ferguson concludes therefore that the Democratic Party of the ‘New Deal’ has been virtually obliterated.

The authors also dealt with a very sensitive and polarizing issue of the US public, Trump, Russia and the role of the services: The question what “outside factors” influenced the election. Up until today a crescendo of investigations, led by special prosecutor Robert Mueller, is centered on the “Russian manipulation and interference of the democratic election”.

Discussions of possible Russian attempts to influence the election had figured in a few news reports media since the late spring of 2016. But within weeks after the election both the Comey (Ex-FBI boss) and the Russian stories were swept up into a much bigger and far more ideologically charged narrative that soon resounded around the world. The allegations about Russian influence dramatically broadened. A wave of leaks from unnamed national security personnel suggested that key people in Trump’s entourage, including incoming National Security Adviser Michael Flynn, a former Army Lieutenant General whom President Obama had fired as head of the Defense Intelligence Agency, had improperly cooperated with the Kremlin, possibly even violating the law. Stories also appeared relating how Republican Congressional leaders had resisted efforts by senior Obama administration officials to publicize allegations about the ties to Russia before the election.  

 One channel of influence which Russian money could have used and which is very much considered as “fact” by a “consensus of US intelligence services” (Glenn Greenwald) are “Advertisements” in the internet. This “fact” is what the researchers have carefully looked at and in the view of Ferguson et al it is put in the proper context:

Testimony by tech company executives at a hearing before the Senate Intelligence Committee suggested that as many as 126 million Americans might have come into web contact with various ads on Facebook while another 20 million people may have been reached via Instagram.  Another study that examined only a sliver of such sites suggested that literally millions of pages of content might in fact have been shared by users. These numbers, however, need to be put in context: They represent a tiny fraction of the “33 trillion posts Americans saw in their Facebook news feeds between 2015 and 2017…Facebook reported that a quarter of the ads were never seen by anyone. And — with the average Facebook user sifting through 220 news-feed posts a day — many of the rest were simply glanced at, scrolled past and forgotten.

The authors draw the conclusion, that these Ads were actually part of the big American internet giants to get into the campaign consulting to make money with them. That the Republicans would need “Russian assistance” in order to orchestrate vote suppression campaigns seems to them “especially silly”.

Some firms could add value though, but every one of them was as American as apple pie. With no publicity, the tech giants – Google, Facebook, Twitter – were all trying to muscle in on the richly rewarding arena of campaign consulting. Their aim was not to “weaponize” internet ads, in the ominous sounding term that analysts of Russian internet now throw around – their interest lay in monetizing them, just as they have restlessly tried to do in everything they engage in.

The paper details the efforts of these giant American internet firms, how they offered campaign consulting, platforms and other forms of partisan support. One particular finding is even somewhat comical. The authors could show that the defeat of Clinton in the Detroit area by internet campaigning (“by Russians”) was “difficult to accept” because 40% of the population was too poor to have internet access.

Suggestions that internet campaigning was responsible for Clinton’s poor showing in the crucial Detroit area are particularly difficult to accept, since about 40% of the city’s population has no internet access, because they are too poor to interest the local telecom  oligopoly.

Therefore the authors of the study conclude (January 2018) that the evidence for the “success of Russian efforts” to boost Trump or suppress Clinton votes is not very strong (even if they cautioned that potentially “other proofs” might come to the surface.)

Not surprisingly, the evidence revealed thus far does not support strong claims about the likely success of Russian efforts, though of course the public outrage at outside meddling is easy to understand. The speculative character of many accounts even in the mainstream media is obvious. Several, such as widely circulated declaration by the Department of Homeland Security that 21 state election systems had been hacked during the election, have collapsed within days of being put forward when state electoral officials strongly disputed them. The paid ads Facebook has disclosed were hardly on the scale one would expect for an all-out effort ($100,000), though (as noted above) their reach can be vastly extended by individual sharing and we expect more action on other platforms will turn up.

The authors correlate the “timing” and – what is known up until today – “the dimension of Russian Facebook” Ads spending.

A more serious problem for strong claims is timing, since the buys were scattered through 2015, 2016 and 2017 and across states, and appear to have focused often on states that had no chance of ever tipping in favor of Clinton. Subsequent revelations by Facebook underscore the importance of this issue, since more than half of its ads are admitted to have run after the election. The Senate Intelligence Committee hearings produced truly microscopic numbers for putative Russian efforts directed at the key battleground states of Wisconsin, Pennsylvania, and Michigan: For Wisconsin, $1,979, with all but $54 dollars of this spent during the primary. Russian Facebook spending in the other two was even more minuscule:  Pennsylvania absorbed $823 and Michigan $300. Unless Facebook discloses some vast new trove, the conclusion has to be that this was no full court press, though some mainstream press accounts continue to repeat them.

A lot of effort and statistics are put together by the researchers in order to illustrate the role of the small and big money contributions to the 2016 campaigns, both of Trump and Sanders. This is very interesting, because they also correlate the shifting “big money” and “small contributions” with the timing of the campaigns and the potential loosing of the Democrats or the Republicans. But according to them the main reason has to do with the development of the “dual economy” over the years and the growing number of “losers” of the “New Economy”.

In 2016, Donald Trump attracted a higher percentage of small contributions than President Obama did in 2012.  Fully comparable data for earlier elections does not exist, in part because price changes have gradually lowered the value of contributions below the legal threshold, which hasn’t changed since 1979 (thus rendering more recent donations truly “small”) and also due to drastic regulatory changes earlier in the seventies.  We thus have to be cautious. But we believe that the 2012 pattern is representative of essentially all presidential elections since the New Deal, with the possible exception of 1964, when so many big businesses and wealthy Americans deserted Barry Goldwater, the Republican nominee, for President Lyndon Johnson).

A great deal of attention and evidence given is related to the question why both Trump and Sanders have gotten at certain times during the campaigns enormous amount of small contributions.

With respect to the Sanders campaign, these tables show something we are confident is without precedent in American politics not just since the New Deal, but across virtually the whole of American history, waiving the dubious case of the legendary 1896 election: a major presidential candidate waging a strong, highly competitive campaign whose support from big business is essentially zero.

To the question why such big changes in 2015, our answer is straightforward: The mass movements that formed behind Trump and Sanders are consequences of the development of a dual economy in America.  

The emergence of billionaire companies like Google, Facebook et al. left a great part of the workforce behind.

This strategy of “fissuring” the workforce led to enormous reductions in the number of permanent workers in primary sector firms and swelled the number of jobs in the low wage sector.

The result of their analysis Why came the upheaval in 2016?   is quite bitter and requires a deeper discussion in general, since similar trends in can be observed in France or in Germany, where these “fissures” will determine the future of the SPD as “Volkspartei” (as a major party) in the future.

Our basic answer is that the 2016 eruptions constitute a tipping point – a moment when the many pressures that had been squeezing voters for a long time cumulated to a point where, quite literally, daily existence for many had become close to unlivable. There is strong evidence that many citizens were searching desperately for ways out of what looked (and in fact are) dead-end situations. Many rebelled as they listened to commentators tell them that the US economy was really doing better than it had in many years and that they should be celebrating America’s exit from the Great Recession. They were unmoved by the chorus of conventional politicians trying to sell old nostrums that by 2014 were plainly obsolete for them in their communities. The reality of the Hunger Games was just too obvious and empty slogans no longer appealed, they just disgusted or enraged. When two politicians broke through the big money cartels that dominate both major parties, popular enthusiasm surged almost overnight to seismic levels, shocking elites in both parties and flummoxing the entire American establishment.