Monday 17 April 2017

Trump and Hitler III - Jack Goldstone update

It's not often that one gets emails from the famous out of the blue, but I got a kind note from Jack Goldstone the other day. He had come across my earlier installment of thoughts on historical analogies between Trump and Hitler; he also pointed out that the differences I highlighted looked a lot less reassuring now. Below are my original points and his comments in blue.

  • While Trump's rhetoric against Latinos is pretty amazing, he doesn't think of them as all-powerful puppet masters controlling the US today. Whatever went wrong in the US recently, according to Trump, is not directly driven by Latinos themselves; their presence is a symptom, not a cause of what he and his supporters think is a malaise          In the Bannon world, the “global elites” take the place of the Jews.  Like the Jews, the global elites are soulless, interested only in their personal wealth, and have no loyalty to any nation.  They show this by carelessly admitting Muslims and other foreigners to undermine national cultures.
  • German fascism had, if anything, a more progressive image of women. While there was a big policy push to get them out of the workforce, and back to children and the kitchen -- there was also a celebration of "Germanic" heroines like the test pilot Hannah Reitsch, or the filmmaker Leni Riefenstahl.  “Nobody respects Women more than I do”   Ivanka Trump moving to a White House role.  Token women (de Vos, Haley, Chao) appointed to cabinet
  • No belief in "Lebensraum" -- there is no potty theory leading Trump to push for territorial expansion. But there is a theory of trade bargaining in which the U.S. has been whipped and taken advantage of and that “must be changed, now.”  Exactly like Lebensraum – an injustice and stupidity against national rights that must be reversed.
  • A conciliatory start. Hitler and friends did not begin their reign by trying to suddenly sound moderate and generous towards their internal opponents (though they did go easy in terms of foreign policy aggression until Germany was stronger militarily...)  And his first week in office?
  • Hitler was very eloquent and a highly talented public speaker. Nobody can accuse Trump of either... But his skill on Twitter has, so far, been the equivalent of Hitler’s orations.  Trump has managed to set the agenda, bypass media, and reach directly to his base by social media.
  • The right-wing elite in Weimar supported Hitler (in the end); in the US, they mostly opposed Trump. We'll see where the opportunists jump once the inauguration has taken place.  Weak-willed republicans and CEOs have mostly fallen into line, come to NY or Washington to kiss the ring.  Few right-wing elites have spoken out against the insanity of Trump’s (1) willful lying about voter fraud; (2) plans for higher tariffs to fund the useless wall with Mexico; (3) efforts to design immigration policies to keep Muslims out and let Christians in from the Middle East.

I agree with much of this, though I always hesitate when we draw parallels between the treatments of Jews and groups today...  

I would point to one important difference - the vigorous response of American civic society, and, to some extent, the judicial push-back. The wave of protests in recent weeks feels different from Weimar, where the social democrats, Communists and other democrats quickly gave up. 

When markets love the bad boys

First it was Trump; now it's Erdogan. Something "bad" happens in terms of future governance, in a democracy -- either the election of an egomaniac with autocratic tendencies or a constitutional powergrab by someone of that description. And a lot of economists believe that good institutions are good for growth and governance, me included (in some way). Now, in both cases, stock markets have reacted positively -- by a lot in the case of Trump, by a bit in the case of Turkey today. (BTW, the same thing happened in Turkey in 2010). There is also another case that I explored with Tom Ferguson a while ago, of a powergrab being associated with stock market increases (not that spectacular overall, but large for connected firms) -- valuation changes after Jan 1933. While this is just a bunch of cases and not a systematic analysis, there are at least some (pretty important) cases when markets seem to love the bad boys and bad news in terms of institutional quality.

How to put these two things together is not entirely clear to me -- constraints on the executive have NOT gone up this morning, in Turkey; and while the verdict is not out on Trump's presidency, there is no sense in which the man has shown excessive deference for checks and balances, etc. In Jan 1933, it became pretty clear pretty quickly that things were not headed in the "inclusive institutions" direction.

So what are the logical possibilities? First, it could be that it's just about stock market listed firms -- maybe everyone including markets understand that authoritarianism is not going to be good in the medium or long run, but listed, big firms with more connections could be doing better. So this would be about a worsening of governance, with established firms benefitting and others suffering. Second, it could be that authoritarianism isn't really that bad for growth and profits overall. This would go against the grain of empirical papers by Daron Acemoglu and co-authors, like this latest installment (with Suresh Naidu, Pasqual Restrepo, and Jim Robinson). Third, it could be that markets are just getting it wrong; short-term optimism is not the same as a fair and balanced judgement of actual future growth. If that was true, then there should be significant money to be made from shorting these "authoritarian pops" in the stock market...