Donald Trump in Context

Ivan Light

The economic background to Trump’s rise to the Presidency

Before examining Trump’s resource base, his personality, or his celebrity, one should understand the economic context in which his career unfolded. By the economic context is meant the economic conditions that increased the likelihood that someone like Donald Trump could become President of the United States. He was not a fluke. The odds were pretty good. Trump is ultra-wealthy, and the number of ultra-wealthy people increased in the late twentieth century in the United States and elsewhere. i “Ultra-wealthy individuals” are persons with 30 or million dollars of net assets. Donald Trump is typical of this group. With 73,100 ultra-wealthy inhabitants, the United States ranked first among nations in the number of ultra-wealthy people in 2016. Trump is an American. Second, of the world’s cities, New York City ranked first in the number of ultra-wealthy inhabitants in 2016. New York had 8,350 ultra-wealthy inhabitants. Trump resides in New York City. Of ultra-wealthy individuals, 88 percent are male. Trump is male. Ultra-wealthy individuals have college degrees in economics and business. Trump’s degree was in business. Of ultra-wealthy Americans, most attended Harvard, but second was the University of Pennsylvania. Trump attended the University of Pennsylvania. Of ultra-wealthy individuals, the top personal interests were philanthropy and golf. Trump enjoys golf. The increase in number of ultra-wealthy individuals increased demand for luxury housing in New York. Trump invested in luxury housing in New York. ii

Now examining the world’s 2,158 billionaires whose aggregate net worth increased 19 percent in 2017,iii we find Trump again typical. In 2016, the United States had 620 billionaires and first place in the world’s billionaire census. In 2016 the United States housed 24 percent of the world’s billionaires but only five percent of the world’s population. Trump is an American. Of the world’s top cities for billionaires, New York City was number one with 102 billionaire residents. Trump resided in New York City. Ninety percent of the world’s billionaires are male as is Trump. Average age of the world’s billionaires was 64 in 2016. Trump was 70. In descending order of college affiliations, the world’s billionaires attended Harvard, Stanford, and the University of Pennsylvania. Trump attended the University of Pennsylvania.iv Of the richest 400 billionaires in the United States, one-third own fortunes derived from companies founded by prior generations. Of the 15 wealthiest multi-generational families, all derive from fortunes created by earlier generations. Donald Trump derived his wealth from a company founded by his grandfather.v

The billionaires’ expanded share of total income created surplus money that what Bernard Sanders called “the billionaire class” could expend for political action, whether as donors to the Republican Party like Richard Uihlein, Sheldon Adelson, Robert and Rebekah Mercer, Wilbur Ross, Paul Singer, John Joseph Ricketts, Peter Thiel, Rupert Murdoch, Charles G. Koch, David H. Koch, or as donors to the Democratic Party like George Soros, Rachel Mellon,vi and Tom Steyer, or as independents, like Howard Schultz, Kenneth C. Griffin and Tim Draper.vii Billionaires running for elective office also became more common.viii Mayor of New York City between 2001 and 2014, billionaire Michael Bloomberg was much richer than Trump. Michael Bloomberg had support for a presidential run in 2008 and 2016, declined to run, and declared his intention to run on the Democratic ticket on Nov. 7, 2019. Before he was denounced in Congress, Facebook billionaire, Mark Zuckerberg has expressed interest in the Democratic nomination for president in 2020 as has billionaire Jamie Dimon of JPMorgan Chase. ix Billionaire, Mark Cuban has frequently expressed interest in running for president on the GOP ticket. Like Trump, Cuban wrote books about how to succeed in business.x Also, like Donald Trump, Mark Cuban appeared on numerous television programs, portraying himself. Television superstar and billionaire Oprah Winfrey has shown interest in the Democratic nomination for president in 2020 as has Robert Iger, billionaire CEO of Walt Disney. xi

Donald Trump was not the first super wealthy business owner to gain the presidency. This is an old tradition in the United States whose culture celebrates the superior skill and wisdom of rich business owners, a topic chapter 8 examines.xii The United States idolizes entrepreneurs and Trump was an entrepreneur.xiii Prior to Trump, who broke his record, George Washington had been the richest president in American history. When elected president, George Washington was considered the richest man in the thirteen colonies. His plantation consisted of five separate farms on 8,000 acres of farmland. In 2014, the average price of one acre of Virginia farmland (including buildings) was $ 4,320. At these prices, George Washington’s farm holdings would have been worth 34.5 million dollars in 2014. Washington owned at least 300 slaves each of whom was worth an average of $25,000 in 2016 dollars, adding another 6.6 million dollars to his wealth.xiv His wife, Martha, had inherited even more landed property and slaves to work it than did George.xv Third president of the United States, Thomas Jefferson, was second only to George Washington in wealth. However, in the nineteenth century, presidents became poorer. They were regularly of middle class or even poor origins in the nineteenth century, which starred “Honest Abe born in a log cabin.” That changed in the twentieth century. Of the eleven richest presidents in American history, seven were born in the twentieth century and four were born in the eighteenth. None was born in the nineteenth century. xvi

Since Ronald Reagan, an entertainer, all Republican presidents have been entrepreneurs born to wealth. Son of a wealthy business family and President of the United States between 1990 and 1994, George H. W. Bush (1924-2018) started the Bush-Overbey Oil Development company in 1951 and in 1953 co-founded the Zapata Petroleum Corporation, an oil company that drilled in Texas. 1954 he was named president of the Zapata Offshore Company, a subsidiary that specialized in offshore drilling. In 1977, his son, George W. Bush established Arbusto Energy, an oil exploration company in his father’s industry. He later changed the name to Bush Exploration. Bush Exploration merged with the larger Spectrum7 in 1984, and George W. Bush became chairman of the Board. In April 1989, George W. Bush purchased a controlling interest in a sports team just as Trump later did. Enjoying celebrity status as the son of a president, entrepreneur George W. Bush was elected president in 2000 and 2004.

Since Reagan, several losing candidates for U.S. president were also wealthy entrepreneurs. In 1962, Ross Perot founded Electronic Data Systems. In 1992 the billionaire entrepreneur ran for president as an independent candidate and earned 19 percent of the vote by campaigning against the North American Free Trade Agreement. Ross Perot ran unsuccessfully as a third party candidate in 1996. In 2010, the Republic Party nominated Mitt Romney for president. Romney founded Bain Capital, a vulture fund that acquired and cannibalized existing businesses. For all these reasons, it is fair to observe that the Republican Party was primed to nominate a rich entrepreneur in 2016.

As Aristotle observed, democracy depends upon a strong middle class,xvii and oligarchy displaces democracy when the middle class disappears. In the last forty years, the United States especially but most developed countries as well have undergone the gradual reduction of the middle class in size and affluence, and accumulation of vast wealth at the top. The result is an increasingly bi-modal income pyramid. If we address only “the hollowing out” of the income pyramid,xviii we lose track of growth at the top. If we address only the economics of the top one percent, we lose track of their political consequences. Big money and political power embrace and support one another. Vast wealth enables the super-rich to buy political influence and to self-fund their political campaigns. Buying political power increased the number of billionaires by enabling them to reduce taxation on their wealth. The tax saving also increased their political influence by empowering them to run for elective office. The result is a vicious cycle: lower taxes on the rich result in more billionaires in office, which results in lower taxes on the rich. Trump was a beneficiary of this cycle and, as president, he extended it.

As of today, of 620 billionaires in the United States, three are declared candidates for president. If one is a billionaire, the odds of being presidential candidate are one in one hundred. For Americans in general, the odds are one in three million. But that is not to conclude that entrepreneurs can buy the election. The growth in size and influence of the billionaire class increased the likelihood that a billionaire would become president in 2016, but it did not guarantee it. Hillary Clinton’s committee spent 639 million dollars on her presidential campaign whereas the Trump committee expended only 302 million dollars, but Trump was elected, not Clinton. Perot and Perot were was rich but they lost the election. Billionaire money did not all by itself elect Donald Trump in 2016. Billionaire wealth is only part of the explanation of how America got Donald Trump. For the rest of the explanation, one must examine Trump’s career in full socio-cultural context.

This except is from Ivan Light and Leo-Paul Dana. Entrepreneurs and Capitalism Since Luther, forthcoming from Lexington Books in 2020. Ivan Light is professor emeritus of sociology at UCLA.

i Anthony Atkinson, Inequality: What Can Be Done? Cambridge: Harvard University, 2018; also Thomas Pikkety, Emmanuel Saez, and Gabriel Zucman, “Distributional National Accounts: Methods and Estimates for the United States.” The Quarterly Journal of Economics 133, 2 (2018): 553–609.

ii 2017. World Ultra-Wealth Report; also, Emily Badger, “Anonymous owner L. L. C.: Why it has become so easy to hide in the housing market.” New York Times 30 April, 2018.

iii UBS/PwC Billionaires 2018. “New visionaries and the Chinese century.” Cited as UBS Billionaires Report 2018.

iv 2017. Billionaire Census.

v Chuck Collins and Josh Hoxie. 2018. “Billionaire Bonanza 2018: Inherited Wealth Dynasties of the United States.” Washington DC: Institute for Policy Studies, 2018, p. 3.

vi Meryl Gordon, Bunny Mellon: The Life of an American Style Legend. New York: Grand Central, 2017. Rachel “Bunny” Mellon, endowed John Edwards 2008 presidential campaign, but withdrew when details emerged of his extra-marital philandering.

vii Jane Mayer, Dark Money: The Hidden History of the Billionaires behind the Rise of the Radical Right. New York: Doubleday, 2016. Concerning billionaires on the left, see: Kenneth P. Vogel, “Battling Trump, liberals descend into tug-of-war,” New York Times Oct. 8, 2017, p. 1; for a list of big donors, see: Alexander Burns, Jasmine Lee, and Rachel Shorey, “Billionaire vs. billionaire: A tug-of-war between 2 rogue donors.” New York Times 12 April 2018.

viiiChrystia Freeland, Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else. New York: Penguin, 2012, p. 77

ix “Mark Zuckerberg says he is not running for public office.” San Francisco Chronicle, 22 May 2017.

x Mark Cuban, How to Win at the Sport of Business, New York: Diversion Publishing. 2011.

xi Trump is one of “14 Hollywood stars” who have “run for political office.” Donald Trump is the only presidential candidate who was both a star entertainer and an entrepreneur. Deirdre Durkan, “14 Hollywood stars who’ve run for political office.” The Hollywood Reporter Accessed 10April 2018.

xii Irvine G. Wyllie, The Self-Made Man in America. New York: The Free Press, 1954.

xiiiGlobal Entrepreneurship Research Association. 2017-18. Global Entrepreneurship Monitor, 2017/18. ISBN 13: 9781939242-10-5. Accessed 10 July 2018, Table 11.

xiv To be fair, George Washington was the only signatory to the Declaration of Independence who manumitted his slaves upon his death.

xv Assuming George and Martha Washington owned 500 slaves between them, and the average price of a slave in 2016 dollars was $25,000, the value of their slave holdings was $12.5 million dollars in 2016 dollars.

xvi “The ten richest American presidents of all time.”, accessed 12 April 2018.

xvii In Aristotle’s view, a correct democracy required a “mixed” constitution in which the middle class preponderated (Politics IV.11). Stanford Encyclopedia of Philosophy, Accessed 14 Oct. 2017

xviii Thomas Piketty, Capital in the Twentieth-First Century (Cambridge: Harvard University, 2014).