Chartbook 373 "We create our own reality" - Trump's delirious negative-sum populism, or how the Empire comes home.

As Trump’s erratic and extreme trade policy shakes the world economy, the basic question of this week is the classic question of realistic political analysis: Who benefits?

As Gillian Tett observes in the FT this morning: Trump seems to be running not just an economic experiment but a “fascinating cultural one, too”.

Thus tariffs have presented voters and financiers alike with a “bait and switch”. Last year Trump pledged to make the American economy “great again”. But he is now telling them they must accept “transitional” — short-term — pain for long-term gain. This is both unexpected and profoundly ironic, given Trump’s populist record.

What gives this observation its force is the fact that it is so hard to identify who actually benefits from Trump’s extraordinary campaign of disruption.

We normally think of populisms as arrayed on a positive-sum v. zero-sum axis.

Positive-sum populism promises that everyone, except for a small minority of people it labels as “social parasites”, can be made better off by strong measures. This is the vision of people’s community touted by Hitler’s aptly named National Socialist German Workers’ Party. Think about the previously incongruous pairings in that party’s title:

National-Socialist

German-Workers.

What made this formula a winning one, was the backdrop of the great depression with mass unemployment, bankrupt industry, collapsed banks and farmers dumping their crops. In the context of a general economic collapse, a national program of reconstruction of the kind theorized by an adventurous new breed of economists in the 1930s, could make the vast majority of the population better off in material terms, at least to some degree. The Nazi regime, Imperial Japan, the New Deal, even 1930s Britain all in their own way proved the point.

Of course, in the Nazi regime the Jewish minority and those labeled as racial and regime enemies were victimized. But that served political not economic purposes. It was not functionally necessary for the regime’s program of national recovery. The Aryanization of Jewish property, which in the late 1930s briefly became a mass phenomenon, was a grotesque rush for bargains at the end of a giant full employment boom.

Of course, German business did very well out of the growth boom of the period 1933-1939. At the level of income distribution, inequality increased. But the majority of the German population saw improvements in living standards too. For the majority of the population Nazi Germany offered a new style of mass social integration. Historian David Schoenbaum spoke of the deproleterianization of Germany in the Third Reich.

A very different kind of populism does not erase social divisions but enhances them. it promises to make one social group better off at the expense of others. This can come in left-wing and right-wing variants.

Left populism mobilizes the majority against the elite in a redistributive campaign. This might take the form, for instance, of property seizures or redistributive taxation.

By contrast, right-wing populism defends the propertied order against the “mob”. If there is widespread leftism, outside agitators are blamed. Once they are eliminated, it is promised, the population will fall back into line.

The classic case of right-wing, zero-sum populism is the first fascism - Benito Mussolini’s movement of the period 1919-1922. After the left-wing upsurge of the so-called “Biennio Rosso” in 1919-1920, the fascist squads served quite unabashedly as the strong-arm of a bourgeois backlash. They beat up trade unionists and murdered agrarian organizers and restored management to its control of the family and the farm.

In terms of political economy, the contrast to Hitler’s movement ten years later is instructive. Unlike the period of depression in 1930-1933, Mussolini’s fascism emerged in the context of post-war inflation. The period 1917-1923 really was the last revolutionary moment in European history. This was where a right-wing populism proved its worth. Inflations are classic situations of zero-sum distributional struggle: workers against factory owners, against farmers, against rentiers, against pensioners. Not for nothing Lenin called inflation the best solvent of bourgeois society.

The contrast to the early 1930s is stark. In the final stages of the Weimar Republic, the Nazi and Communists staged street battles across Germany. But in the context of the Great Depression, with mass unemployment and with Stalinism consolidating itself in the Soviet Union, the moment of popular uprising had passed. The risk was not so much that factories would be occupied, but that they would be shut down.

Even in calmer times, populisms often emerge as redistributive movements. In the late 19th century, for instance, heavily-indebted American farmers mobilized against New York bankers who wanted to defend hard money and foreign creditor interests. Famously, William Jennings Bryan inveigled against the gold standard as a “cross of gold”.

So this brings us to Trump. What sense can we make of Trump’s political economy?

With hindsight, Trump 1.0 is perhaps best described as a lite form of positive-sum populism. He won the election in 2016 against the backdrop of talk of “secular stagnation” (Summers) and a mini-recession in manufacturing. From 2017, Trump’s extraordinarily expansive fiscal policy accelerated growth, helping to restore something close to full employment. Tellingly, this generated tension with the inflation-guardians of the Federal Reserve. Meanwhile, tax cuts handed huge benefits to the highest earners and deregulation favored business. Trump’s wilder plans were either not fully fledged, or, he was restrained by “the adults in the room”. We don’t know what a second Trump term might have looked like. The chaos of 2020 blurs any clear analysis. But the escalation of tension with China was ominous, as was the radicalization on the right-wing.

With Trump 2.0 we are getting the full load. The offensive on many different fronts is aggressive and expansive and continues the radicalization of 2020 in extreme form. From the outset it was clear that the economic backdrop in 2025 is quite unlike in 2017. For all the silly GOP talk about a weak economy, the US economy was in fact growing strongly. The labour market was tight. Markets were booming. And into this mood of “American exceptionalism”, Trump has hurled bombs. First with DOGE that was at least headed by a rampaging business-man. And now the tariff campaign.

Trump’s attachment to tariffs has been no secret. But the breadth of his trade attack is breathtaking. It could be associated with a national protectionist form of populism. But as the extent of his ambition becomes clear, what is astonishing is how personalistic it seems. Trump’s effort to reframe America’s relations with the world economy seem almost entirely devoid of what analysts generally call a “social base”.

If we think of society and politics as dominated by distributional struggles, then protectionism generally appears as the defensive demand of sectional interests struggling against foreign imports, European farmers, for instance, clamored for protection from cheap North American grain. The US car industry in the 1980s was shaken by the threat of Japanese competition.

This is the world that Trump seems to hark back to in his imagination. And he can find points of connection in the most battered parts of America’s political economy, with the United Auto Workers, for instance. But the fact is that in America’s modestly internationalized economy - one should not exaggerate the degree of globalization - there may not have been huge enthusiasm for further trade liberalization, or widening foreign market access. But neither was there a vocal lobby for comprehensive protectionism, let alone total “decoupling” from China.

Detroit’s “Big Three” were not clamoring for their trade relations with Mexico and Canada to be disrupted. America’s manufacturers were not asking for the price of their imported components and raw materials to be hiked, or their export chances to be jeopardized. American agro business depends heavily on export markets. Wall Street has no interest in abandoning the dollar’s exorbitant privilege. America’s globalization was not the figment of some liberal globalist imagination. It was shaped very much to the tastes and in the interests of American business.

So, you say, Trump is actually a left-wing populist in disguise. He is actually acting in the interests of the American working-class. But where is the mass base for this trade policy?

Unemployment is in fact low. The economy under Trump and Biden was growing more rapidly than any other rich economy. Less than ten percent of American workers, are employed in manufacturing. At the margin, some Americans might prefer to be employed in factories than in service sector work. Some of those jobs pay marginally better and offer marginally better benefits. But it depends who you work for and where. And most of the growth in manufacturing, if it is to happen, is likely to happen in non-union states. There simply is no mass movement clamoring for reindustrialization.

So far the damage has been mainly to financial markets, but the stagflation that is now coming into view, will inflict far wider damage. This is not so much positive sum, or zero-sum, as negative-sum populism. It is destruction with a promise of creation to come.

As Cam pointed out on the podcast we recorded yesterday, the “better America” with a revived manufacturing economy that would seem to be the logic telos of massive national protectionism, is in fact largely a figment of the Trumpian imagination.

So Trump’s economic policy is not just as Gillian Tett argues, a cultural experiment in whether or not Americans are willing to take bitter medicine. The the promised land of a reindustrialized America itself, the future for which Americans are enjoined to take the pain, is itself a strange minoritarian dream far removed from the reality and everyday life of the vast majority of the population.

When one talks about a politics of sacrifice, of “bitter medicine”, it is hard not to think of Margaret Thatcher’s political rhetoric in Britain in the late 1970s and early 1980s. And perhaps that is how Trump, a man of the 1980s, imagines himself. As contemporary analysts like Stuart Hall realized, Thatcher also deployed a sophisticated social imaginary. She conjured a new reality into existence.

But precisely when it comes to economic policy the contrasts between Thatcher and Trump are stark:

Thatcher acted against the backdrop of the inflationary turmoil and class conflict of the 1970s in the manner of a zero-sum populist of the right. She was determined to crush the British organized labour movement, which she denounced as “enemies within”. She had substantial social backing for that project within the British middle class and segments of the working-class. She generated more support through a sophisticated and highly realistic hegemonic strategy crucially amongst the beneficiaries of privatization. The medicine was not bitter for everyone. On the contrary. Hardship and losses were tightly focused. Ending stagflation was the point.

Thatcher, of course, harked back to a glorious past. She liked to talk about Victorian values. But the economic future she offered was transformative, embraced structural change and was squarely aligned with powerful business interests, above all in the City of London.

Bringing into sharp relief just how peculiar the Trumpian project is, poses a further question. If as Gillian Tett suggests Trump is engaged in a novel and unexpected cultural project of administering bitter medicine. And if the goal itself, of a reindustrialized America, is detached from immediate social reality. Are we not brought back to the conclusion that so many have reached in recent years:

Something has happened to American political culture that divorces large parts of it from social reality. The result is that “cultural experiments” of the type that Trump and his gang are undertaking with the US economy are no longer shot down. The bubble is not burst. The madness is now everyone’s reality.

The analogue that is brought to mind is not so much the gerontocracy of the late Soviet Union as the delirium that followed in the post-Soviet 1990s.

Back in the early 2000s an aide to George W. Bush famously boasted to Ron Suskind: “We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality — judiciously, as you will — we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors… and you, all of you, will be left to just study what we do.”

That was then. They were talking about laying Iraq to waste. In 2025, as the empire decomposes, with Mar-a-Lago as the “Green Zone” that delirious sense of unhinged world-making has come home.

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