“It’s the economy, stupid,” a catchphrase coined in the 1990s by American political strategist James Carville, made George H. W. Bush — who won the First Gulf War for Americans — a one-term president, catapulting Bill Clinton into the White House. As Donald Trump’s one-term presidency winds down with an attempted insurrection, widespread social media bans and a last-minute impeachment trial, it is time to upgrade it to “It’s the system, stupid.”
The United States does not have the social contract in its DNA. While most other countries limit economic freedoms to prioritize (or at least pay lip service to) maintaining a safety net, providing health care and helping the most vulnerable in society, a large number of Americans believe that it is not the government’s job. Violent and catastrophic events like the Civil War, the Great Depression and the civil rights movement brought about emancipation, social security and Medicare and Medicaid, respectively.
Most Americans, however, believe that running a small system of carefully crafted checks and balances among the executive, legislative and judicial branches is the government’s primary responsibility. With minimal regulatory interference, it is the economy that has dictated politics in the US, making it somewhat anomalous among developed countries.
Over the past few decades, this structure has given the United States enormous unfair advantages. In the aftermath of World War II, with the collapse of European colonial powers, intellectual capital moved in droves to calmer American shores. The boomer generation, born between 1946 and 1964, brought enormous wealth and prosperity to the United States, making it a world leader. So much so that the turbulent civil rights and Vietnam War era, as well as the scrapping of the gold standard during Richard Nixon’s presidency, did not dislodge the US dollar as the world’s reserve currency.
A Perspective on America’s Imperfect Democracy
Despite all the flaws, the complex and sophisticated US financial markets, along with the occasionally susceptible ratings agencies, are considered transparent enough for the world to trust the dollar. That has brought immeasurable benefits to this system, exhibit A being the ability of federal, state and municipal governments, as well as American corporations, to borrow money at throwaway rates. It sustains the productive and efficient American military-industrial and research-industrial complexes. Thanks to this system, even individual Americans, on average, have racked up personal debts of up to $30,000 with no tangible plans to pay it back, a privilege few others around the world enjoy.
This unfair advantage is a game of trust and perception. The US cannot go back to pegging its currency to gold. In the recent past, the world has already gone through a few scares. During the 2008-09 global financial crisis, when the US dollar seemed volatile, investors briefly ran to the Swiss franc. It forced the Swiss government to announce unlimited capital controls to keep its currency from rising and maintain a competitive economy. European regulators followed suit by forcing reluctant Americans to participate in tougher global financial regulations.
While China is still far away from matching developed countries in per-capita GDP, it is slated to overtake the US in the absolute size of its economy in a decade or two. It has already started forcing smaller partners to trade with it in renminbi instead of the US dollar. In the middle of a pandemic, despite a debt-to-GDP ratio of almost 300%, China recently sold its government bonds at a negative interest rate. There is no immediate threat to the dollar’s pole position because there is currently no good alternative: 40% of international trade and more than 60% of the world’s outstanding debt securities are held directly in US dollars. Competitors are waiting in the wings, looking for chinks in the American armor. However, it is the stable American political system that underwrites this economic behemoth.
Assault on the System
Although not shocking, that is why Donald Trump’s assault on the system — including the physical attack incited by the executive branch against the legislative that took place on January 6 at the US Capitol — is ironic. Born in 1946, two years after the declining colonial powers adopted the US dollar as the reserve currency, Trump has embodied, nay, ruthlessly exploited, all these privileges throughout his career. Born with a silver spoon in his mouth, he has bankrupted one business after another, duping investors and customers by always staying one step ahead of others. Trump has always found lenders from around the globe to bankroll his private businesses. When he could not beg, borrow or steal to get reelected, losing on the world’s biggest stage, his narcissism almost brought down the whole system.
The United States is still considered a center-right country because even left-leaning centrists implicitly understand that they are, above all else, serving the economy. And right-leaning centrists have, against their stated principles, indulged in the moral hazard of bailing out failing businesses with trillions of dollars at the expense of individuals. However, with the underlying system showing its weakness, it was high time businesses paid back in kind.
The bans instituted on Trump by Twitter, Facebook and other online platforms seem excessive. With moderators in place, they could have temporarily suspended his account or moderated each of his posts until Biden’s inauguration. Although these private companies are not legally obligated to abide by the First Amendment, which protects freedom of expression from government overreach, their actions (with reasonable restrictions) would have upheld the spirit of free speech. Perhaps they were erring on the side of caution. Parler, a far-right social media network with no mechanisms or desire to enforce legal restrictions on freedom of expression, was disowned by Apple, Google and Amazon overnight. Scores of banks, brands and even the PGA have stopped doing business with Trump. Several corporate houses have halted political donations to him and his enablers.
After intelligence briefings following the attack on Congress, horrified military leaders (not just retired, but even serving members) have issued unusually stark warnings to active-duty personnel against indulging in seditious acts. The House of Representatives has impeached Trump for a historic second time with a bipartisan vote. All eyes are now on the Senate, the self-proclaimed greatest deliberative body in the world. Outgoing Majority Leader Mitch McConnell has announced that the Senate will take up impeachment only after Biden’s inauguration.
Time will tell whether it was McConnell’s bargaining chip to ensure Trump did not cause more harm while still in power or just a delaying tactic to minimize the political costs of convicting Trump. The stakes are high because, if Trump is not convicted and wins again in 2024, no one will have any leverage over him. When coining his winged catchphrase, Carville had assumed that the underlying system was rock solid. In a mere four years, Donald Trump has shown the world it is anything but.
The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.