Socialist economist George Kerevan analyses how the economic conjuncture is creating rifts in the US ruling class.
Joe Biden’s political demise results less from his age or ability than from shifts within the US ruling class caused by the changing nature of the American economy.
Bourgeois economists call it “the Trump trade” – how the markets are responding to the imminent election of Donald Trump and its likely impact on the global economy. As ever, bourgeois economics gets matters back to front. It is deep sea changes in the global economy that are driving political change across the imperialist system.
A Trump presidency will see America impose a uniform, 10 per cent tariff on all imports, including from Europe. Trump also intends to cut taxes to boost consumption and investment – inevitably raising the US national debt. Result: the US stock market has reached record highs this year in anticipation of a Trump administration pump-priming another economic boom. Or put another way, US domestic capital has funded another Trump presidency precisely in order to get its guy in the White House to cut taxes and deregulate the economy.
Pro-Trump fundraising groups raised more than $400mn for his presidential election campaign between April and June — a haul that almost matches the cash raised during his entire 2016 campaign. Banking heir Tim Mellon is Trump’s biggest disclosed donor, donating $75m, including $50m the day after the former president’s conviction for falsifying business records to cover up an affair with a porn actress. Also, Ike Perlmutter, the former chair of Marvel Entertainment, donated $10mn following the verdict.
However, there’s a snag. The US economy is already operating at close to capacity. Boosting the economy further is likely to cause inflation to accelerate. Normally that has implications in the bond market where the US government borrows. Inflation eats into bond values so demand for bonds falls as inflation rises. That in turn increases bond yields, i.e. borrowers (in this case the US government) have to offer higher interest rates. But this normal process has been turned on its head.
US bond prices are actually rising as a result of more investors buying lots more US government medium-term bonds despite the threat of inflation. Why? Because US bonds are the safest way of parking money. US debt is backed by American military and political power. The global bourgeoisie is well aware that intensified economic and military competition between the imperialist blocs is going to lead to crisis and perhaps regional confrontations. In fact, competing capitals are the instigators of this confrontation. But capital is also good at insuring its own survival. Hence the flight into safe financial havens: US bonds and gold. As well as bond prices rising counterintuitively, gold has reached a series of historic highs since March.
Rise of the Oligarchs
A second Trump presidency is not just more of the same. Beneath the political movements a profound shift in the composition of US capital is taking place. For decades, the Democratic Party has been the political vehicle of Silicon Valley and the big US high-tech monopolies. They favoured globalisation and the free movement of labour and capital so they could offshore production to Asia, where wages were lower. Till now, Joe Biden has been the political front man for this strategy.
This globalist focus put tech capital in conflict with US domestic capital (retail, telecoms, health care, basic manufacturing) and the latter’s political representative Donald Trump. This binary split has determined US politics for the past three or four presidential elections. However, we are now seeing major divisions inside tech capital and a switch by key tech entrepreneurs to Trump.
Leading the charge is electric car and space investor Elon Musk, who is bankrolling Trump’s campaign to the tune of $45m a month. But Musk’s embracing of Trump represents more than simple another turn in the entrepreneur’s quixotic and erratic behaviour. A swathe of Silicon Valley billionaires has switch to Trump. They include Peter Theil, the German-born co-founder of PayPal; Marc Andreessen and Ben Horowitz, founders of venture capital firm Andreessen Horowitz and two of the most important figures in Silicon Valley financing; and the Winklevoss brothers, famous for their legal battle with Mark Zuckerberg over the invention of Facebook.
Not only is a significant section of US tech capital now funding Trump, they have also moved to control the White House directly. Trump’s new Vice-Presidential sidekick, JD Vance, is a protégé of Peter Theil. Vance has had a meteoric political rise. But it was Peter Thiel who first hired Vance at his global investment firm in 2017, and then nurtured Vance’s political career, donating $15 million to his successful 2022 Ohio Senate campaign. JD Vance is not some hick opportunist Trump has brought on board so as not to hog the limelight. JD Vance is big tech’s man for the presidency in 2028.
Why this political split in the ranks of US high tech? After all, Elon Musk still manufactures his electric cars in China so why should he now favour Trump’s turn to protectionism? And Theil has very close ties with the US intelligence community through his secretive Palantir data mining company.
One explanation is that US capitalism is increasingly oligarchic. Certainly, there has always been a strain of oligarchy in American capitalism since the Civil War. But the failure historically to overthrow the bourgeois system; the centralisation of the US and global social surplus in fewer and fewer hands during the neoliberal era; the crushing failure of European technology in the face of competition from American high-tech; all have combined to create a US oligarchical class with mobile riches beyond anything seen before. It follows that unhinged sections of this oligarchy are now chaffing against any form of state taxation or regulation, or indeed any form of social control whatsoever.
This anti-statism is dignified with the label of “libertarianism” coupled with and a spurious crusade against so-called elites (Theil’s particular bête noir). But the oligarchs need the state – Musk’s SpaceX and Theil’s Palantir subsist off state contracts. The oligarchs’ ostensible attack on “the deep state” is in direct proportion to the profits they milk from the US taxpayer. In reality, the likes of Musk and Theil are anti-democracy, not anti-state. Their sudden desire to put Trump and Vance in the White House is to subvert popular democracy entirely in favour of their own deep state.
Differentiations inside high-tech
At the same time as some tech oligarchs are freeing themselves from the Democratic Party and (ipso facto) the traditional economic system, a gulf is opening up between them and the original Big Six tech firms – Apple, Amazon, Alphabet (Google), Meta (Facebook), Microsoft and (latterly) Nvidia. The Big six are massive, global technological monopolies. Over time they have also become key players in global finance by accumulating huge financial surpluses they cannot re-invest profitably in their own businesses. But the Big Six manage these surpluses in a low-risk, conservative fashion. The seek to preserve value rather than use it or grow it – or use it for social good. Such is the insane logic of late capitalism.
As a result, the Big Six (and some of their liberal shareholders, such as Bill Gates) remain close to the Democrats – as a reflection of their material need to maintain a stable world order. They also remember that Trump (during his first presidency) tried to tax the surplus cash the Big Six had parked outside the US, in a bid to force them to create more jobs in America.
Oligarchs such as Musk and Theil are outside this system. Musk funds his companies through huge borrowing – Tesla and SpaceX do not possess the massive financial reserves of the Big Six and live off market success. Theil is a private investor in a host of start-ups which potential threaten the Big Six or are threatened by them. The oligarchs funding Trump and Vance are seeking to disrupt the Big Six monopoly of government influence controlled via the Democrats. At the same time, the Big Six are also facing saturated markets which are resulting in a recent fall in earnings per share. They need greater access to foreign markets, not protection.
The sharpening conflict between the interests of the Big Six (meaning their managers and institutional share owners) and the predatory Oligarchs can be seen in the behaviour of the US stock market – indeed these financial shifts are a crucial part of the emerging political and economic antagonisms. Big Tech stock prices have dominated the US financial markets for years, but this is changing. Big Tech has bet heavily on AI but returns are still a long way off – which investors are starting to realise. At the same time, some parts of Big Tech – especially in semiconductors – have been facing intensified global competition. As a result, this year, US investors have been turning increasingly to so-called small-cap companies in the Russell 2000 share index. Here are concentrated a host of smaller AI, energy, cloud computing and biotech firms with a growth potential. The independent Oligarchs are key investors in these new companies. The Russell 2000 index has jumped dramatically in value in July, fuelled by hopes of a Trump victory. Trump is pressuring the Federal Reserve to cut interest rates and many Russell 2000 companies are funded by debt.
Project 2025
There are immediate policy consequences arising from the re-composition of the ruling class bloc around Trump. Much of this new thinking is contained in a 900-page document entitled Project 2025. This is a blueprint for a Trump presidency developed by the right-wing Heritage Foundation think tank. The authors of Project 2025 are former members of the last Trump administration. VP candidate JD Vance has close ties with the Heritage Foundation, which seeks to become the ideological force behind the new political bloc being forged between the Tech Oligarchs and domestic US capital.
We should be careful not to confuse Trump himself (a demagogue but still only a cypher for real class forces) with the more sophisticated, long-term strategy of the Tech Oligarchs as expressed in Project 2025. The Project recommends sweeping away many of Biden’s regulations controlling the development of Artificial Intelligence (AI) – regulations that are framed more to protect the interests of the Big Six than the ordinary public. The Tech Oligarchs want a free-for-all development of AI, the better to out-compete China.
Project 2025 also has major constitutional ramifications. It proposes to put the US central bank – the Federal Reserve – under greater direct political control. The aim in the short run is to lower interest rates. In the longer run, Project 2025 envisages major bank deregulation.
Perhaps the most immediate result of a Trump presidency will be in foreign affairs. Europe fears US disengagement following a Trump victory. But potential Vice President Vance is an even more outspoken “isolationist” than the more pragmatic Trump. The forces at work here are not simply ideological. Trump and Vance’s “isolationism” is fundamentally a US rupture with the European bourgeoisie rather than a wholesale retreat from global involvement. Once again, the roots of this rupture are economic.
The digital economy has profoundly disrupted the normal functioning of capitalism. The ownership of a legal or market monopoly in digital technology confers access to vast super profits. Tech monopolies are able to capture massive amounts of global surplus value by charging excessive profit levels for their products. In addition, tech companies have monopoly access to personal data that they alone can exploit. In this accumulation regime, the tech giants have been able to stave off – for a time – the inevitable decline in the average rate of profit that normally acts as a break on capital accumulation. It is therefore no surprise that the existential threat from China to challenge US technological supremacy has provoked an extreme reaction from all factions of the American bourgeoisie. Even Elon Musk, who still has significant Chinese interests, is smarting from the fact that China now dominates the global EV market.
Trump is dumping any foreign commitment that gets in the way of America’s confrontation with China. That includes supporting Ukraine indefinitely in its war with Russia. In this geopolitical and economic reality, Europe is a liability. For decades the European bourgeoisie has relied on America to defend it while happily trading with the Soviet Union and then Putin’s Russia, and now latterly with China. Those days are over. Europe no longer poses an economic threat to US interests and no longer needs to be placated or defended.
An independent Left
So farewell Joe Biden. But Biden’s demise still leaves the dominant bloc of capitalists in the US under threat from the new alliance between the Oligarchs and domestic capital. Of course, there are contradictions in this new alliance. Domestic US capital certainly benefits from import tariffs on Chinese goods and from lower business taxes. But the Oligarchs are bent on extreme deregulation and the abolition of much of the governmental infrastructure that aids and protects domestic capital. But for the moment, the new political bloc could strike an existential blow against the Democratic Party.
Where does this leave the US working class and its allies? What passes for a left in the Democratic Party was the biggest cheerleader for Biden – their funding came from liberal elements within the Big Six. Yet Biden’s level of support among non-college voters of all races had plummeted to 39 per cent, which is nine percentage points beneath his level of support from those voters in the 2020 election. Trump has deliberately recruited Vance because of the latter’s working class origins (even if long gone). Unless the organised US working class breaks with the Democrats and creates an independent pole of attraction, it will be sucked into (and broken) by Vance and Project 2025.
