Where are the enlightened capitalists?

We are seeing the richest democracy in the world being subject to an attempt to transform it into an autocracy. How this will end is not clear and will depend on the opposition, the economy and the checks and balances. It is an attempt surrounded by corruption and incompetence. Although events and decisions have a random component, Trump has reached power for the second time with the support of powerful interests.

The conservative columnist of the New York Times David Brooks argued that “It’s time for Americans in universities, law, business, nonprofits and the scientific community, and civil servants and beyond to form one coordinated mass movement.’ (I miss churches in that list). But will business leaders participate in a massive uprising?

Political scientist Steve Levitsky said: “If we’re going to mobilize, it’s going to be the most prominent, the most well-endowed, the most privileged and protected of us in civil society who have to take the lead.” Levitsky believes that the biggest threat to aspiring despots may come from other elites rather than from mass protest below.

Stuat Kirk in the Financial Times says that “The silence of CEOs in the face of Donald Trump’s tariff chaos is one of the biggest failures of leadership in corporate history. Where are they when we need them? In the corner shuffling their shoes.”

But it is not only the tariffs. In the recent decades, enlightened capitalists in the US organized themselves (for example, around the Bussiness Roundtable)  to promote the idea of a responsible market economy were companies would have a social purpose, fighting extreme inequality, corruption and climate change. Trump 2.0 is built under the assumption that all this is a concession to wokism. 

Some business leaders have politely complained about tariffs, but not much about the demolition of public goods, the violation of human rights or the destruction of democratic international alliances. What is their broader view of capitalism then?

Capitalism has been compatible with very different political regimes over history. Most of Europe and America are capitalist and democratic today, but Spain under Franco or Chile under Pinochet were also capitalist. Are business leaders indifferent between these options? It is important for the other democracy participants to know, because we may wait for them or not.

Some business leaders could argue that what is happening is not their responsibility, except that it is, because many of them made it possible with their lobbying and their donations.

The worst ignorant against the best universities

One thing that truly makes America great is its universities, both public and private.

Trump threatening Harvard University to cut its financing unless it accepts to lose its independence, and Harvard saying no to authoritarianism, shows that when the current President says “Make America Great Again,” he in fact has in mind a very narrow and sectarian view of his country.

The Trump administration will freeze over $2 billion in federal funds because Harvard refused to comply with a list of demands that threatened its independence. Harvard leaders believed saying no was worth the risk. The University’s President has said it clearly: “The university will not surrender its independence or relinquish its constitutional rights.”

In Europe, we have always felt envious of the American universities –and tried to benefit from them, sending there our best future scientists and academics. And we watch amazed this act of national self-harm. Italian journalist Michele Serra has said in the Italian newspaper La Repubblica on April 17th that

"The social rancor of the ignorant who detest culture does not allow a shadow of doubt about the theory and practice of Trumpism. Culture is something that money cannot buy, not even the billions of Trump and his friends, and this makes it particularly unbearable to people who consider any human being for sale. Learning is more difficult than commanding. Destroy everything you cannot have, everything you cannot be: this is Trump."

Her colleague on the same page, Concita de Gregorio, adds: “Dictatorships write textbooks, burn books, dismiss academics.”

Although Harvard and other universities may win in Court, the Trump administration will push further for cuts in their funding. In the long run, only the electoral defeat of Trump and Maga will ensure the survival of this global public good, the US university system.

This is part of Trump’s campaign against science. The smell of Macarthism cannot be hidden behind the obsession with wokism and the hypocritical accusations of anti-semitism (mostly code for students criticizing another neo-fascist government, Netanyahu’s). In the fight against trumpism, the resistance of universities will be an important building block.

Is there a better model to explain Trump?

John E. Roemer has an old article, “Why the poor do not expropriate the rich” that, in my view, gives the best explanation of modern right-wing national-populism. In a democracy, given the distribution of income in any country, the median voter is poorer than the voter with average income: as a consequence, the median voter, the one that decides elections if there is only one dimension of voting under some assumptions, should be pro-redistribution. If the only concern of voters was material welfare, majority voting would yield strongly distributive policies, in the extreme the expropriation of the wealth of the rich. However, although at the beginning democracy was associated with the expansion of the welfare state, national democracies are today compatible with high levels of inequality.

There are several reasons for this paradox, most of them listed in a review article by Adam Bonica and others. But most of them go back to the answer that Roemer gave to the question in the title of his article: the poor do not expropriate the rich because the latter mobilize policy dimensions (cleavages) other than income and wealth, such as religion, ethnicity, "values" or scandals. In some cases, these dimensions correlate with income (South Africa) and redistribution is inevitable, but in many cases the poor majority can be divided across ethnic or religious lines, and that breaks the pro-distribution coalition. In addition, if there are winning coalitions for ethnic or religious reasons, these can be easier to mobilize because they include at least part of the rich, who have more resources to invest in politics (time, media, money). Modern right-wing national-populism is just the adaptation of this strategy to modern technologies and constraints. Here, there is no dilemma between "economic" and "cultural" explanations to populism: both are integrated in the same conceptual framework.

As Dani Rodrik has explained, when inequality increases (for example, in times of macroeconomic shocks), the incentive of economic elites to mobilize other cleavages increases: “as economic inequality increases in society, a party representing the rich is more likely to invest in strategies that appeal to identity and culture. Greater inequality means the median voter grows more distant from the rich in terms of where they stand on economic policy interests. For the party of the rich, there is now higher return from a political narrative that catalyzes identity around issues such as racial resentment, gay marriage, women’s rights, and immigration, all of which can give low-income voters a reason to vote against their purely material interests.”

Of course, reality is much more complex than a simplified model, but good models are useful because they can pose meaningful questions and test precise hypotheses. Roemer’s explanation can be enriched to incorporate irrationality (Trump’s, for example), in a world of trial and error by boundedly rational agents, where gains for particular groups are the result of selection and adaptation.

Fascism as an extreme case, when the powerful interests fail by democratic means, can be incorporated to the same model. Instead of focusing on income and wealth distribution, a sufficient part of the relatively poor focus on interethnic redistribution, and scapegoats, foreigners or ethnic minorities can be targeted. In all these cases, it is understandable that a lot of attention is paid to the political (typically pathological) leader, but there are powerful underlying forces behind his emergence.

Thinking about these theoretical issues may be seen as a luxury and a waste of time in dramatic moments. But it can also be seen as a way to think about how best to react. If the powerful compete in a multidimensional policy framework, the relatively poor majority must also become competitive in the battle for the dominant cleavages, in a way that will be different in different political contexts.

Democracy is not a spectator sport

I participated yesterday in the demonstration of the Democrats Abroad in Barcelona against Trump 2.0. It took place in Plaça Sant Jaume, the “political” square of our city, where many demonstrations take place, and where the City Hall and the main building of the Catalan government (or Generalitat) are located, one in front of the other. As an activist reminded me, not being a US citizen, I cannot join Democrats Abroad, but I could join in the chants and show my solidarity. The organizers claimed that they were more than the first time some weeks ago, and they will be even more next time. I hope that more locals join, although yesterday I was not alone in that category either. Journalists that are based in Catalonia and that are symbols of the fight for freedom were there, such as Siscu Baiges and John Carlin.

One of the demonstrators was showing a placard saying “Democracy is not a spectator sport.” This message is very important these days. Some progressives all over the world may feel some intimate satisfaction at seeing the US seeing how their democracy is attacked (what the Germans call “schadenfreude”), because many democracies have been attacked in the past by US governments and interests. But that would be unfair and unwise. Most US citizens are victims of Trump, and would not have approved of violations of human rights in other parts of the world.

It is also true that the erosion of democracy does not happen for the first time, and even in the US it didn’t start now. The concentration of power in private hands is not something new. But the acceleration of destruction under Musk and Trump 2.0 is very serious and costly: for science, for peace, for freedom. We Europeans should have been worried a long time ago (actually, many were worried already), but increased concern is totally justified.

What to do? The Supreme Court and courts in general may stop, perhaps, some of the worst steps of the autocrats. Markets are also important, and are a disciplinary device, but only of economic missteps, not necessarily of human rights violations. Federalism and the diversity of institutions in the US cannot be all destroyed at the same time. But learn from Latin America: their military dictatorships were defeated in many countries because people mobilized and made enormous sacrifices. Regime change is fought by collective action: wait and see has never been an option, in spite of the individual risks, which understandably each one should manage as well as possible.

In Europe we can do many things, to defend ourselves and to show solidarity. The example of the Colegio de México comes to my mind, the institution that was created after the Spanish Civil War in Mexico to attract intelectuals that came from exile escaping the Franco dictatorship, and that kept reminding the world of the atrocities of that dictatorship. It is not enough to attract individual scientists and academics in our existing institutions, they will miss too many things. New instituions will be needed. Trump’s is not a military dictatorship, but is demolishing democracy nonetheless. He will not be stopped if we do nothing.

Trump 2.0 as regime change

The Musk/Trump government must not be treated as a new administration, but as an attempt at regime change, internally and globally.

Serious enough things are happening as making passivity or indifference morally unacceptable. I can’t even understand how there is a debate about this in the US Democratic Party. I can’t think of any regime change that has been stopped by waiting for their authors to stumble and make mistakes.

Enough has happened, but at least it should be treated as a small probability of something (or several things) catastrophic happening, like a nuclear accident or a major public health problem.

The rich and powerful thought that politics and economics were separable, that you could lobby for lower taxation and regulation, and at the same time keep democracy stable.

It is the same mistake as in the 1930s, which does not mean that this is exactly like the 1930s. But we should not wait until we find out.

Mobilization is needed, in the US and in Europe. That’s why what happened yesterday in Rome is important.

Regulators: independent no more?

One of the victims of the Musk/Trump regime has been the Independence of regulators. By applying the authoritarian doctrine of the unitary executive, they are undermining any power that does not derive from the President. Cass Sunstein, a legal scholar and former Regulatory Czar under Obama, has explained it in the New York Times, as well as the political scientist Jan-Werner Mueller in The Guardian. 

In the UK, the Labour government has removed the head of the Competition and Markets Authority under the argument that he wasn’t contributing enough to growth objectives. However, many authorities remain with a relatively independent regulator, and the country is even creating a new independent regulator for the football industry. The situation has a more sinistre caliber in the US, in my view.

Two former independent competition regulators, John Vickers from the UK and William Kovacic from the US, defend the benefits of regulatory Independence in an article in The Economist this week.

With several distinguished colleagues (Jon Stern, Paul Levine and Miguel A. Montoya) I did research on regulatory Independence, drawing from insights about Central Bank Independence. I summarized our findings in a 2010 paper and more recently I argued in favor of a second generation of commitment devices.

Regulators were never that independent, the Independence was never absolute. The institution relocates but does not solve the commitment problem. There’s the paradox of Independence needing a strong government (and a strong legislative majority) that has the political will to respect Independence.

The institution will not die (well, we'll see in the US), but it has to adapt to a changing world.

A large scale assault on public goods

The book “A Libertarian Walks into a Bear” is the chronicle of an experiment in the creation of a libertarian colony in a small village in New Hamshire, devoted to eliminating taxation and regulation at the local level. The experiment includes cryptocurrencies and bizarre characters. The consequence is utter failure, and an increase in violence –including the violence of bears (suddenly attracted to a dirty place) against humans.

The last edition of the book finishes with an afterword explaining that the leaders of the failed experiment are now promoting the secession of New Hamshire from the United States, apparently copying the experience of Balkan countries, those that resulted from the Yugoslavian wars at the end of the XXth century that killed several tens of thousands of people. Beyond Bosnia and Slovenia, the author claims that the promoters want to imitate the independence of Catalonia as if this one had succeeded. I hasn’t: the only secessionist attempt that has been completed in the European Union is Brexit –another failure in institutional engineering.

But the leaders of that attempt in New Hamshire do not need to promote their secession from the U.S. any longer, as now the US as a whole has been taken over by leaders that are trying to develop a large scale project based on the same principle: the elimination of public goods and services. In economics, public goods are goods that are shared by everybody (non-rival and non-excludable). Many of them are provided by government. Not all of them: for example, the Pythagoras theorem was authored you know by whom. But you can sabotage the use of public goods such as good ideas and theories by reducing the public budget for education and science.

Every day we receive news from the new US administration of an assault on one type of public good or another. I’ve been keeping a non-exhaustive list: Science, Education, Payment systems, International trade, Quality of appointments, Regulators (and where regulators survive, the victim are independent regulators, to be replaced by puppets of the president or Musk), Public health, Climate change mitigation, Weather forecasting agencies, International alliances, Rules, Language and truth, Separation of powers and checks and balances…

Public goods will be replaced by public bads (like bad appointees) or just eliminated. Unless the experiment is somehow stopped, the predictable consequence is indefension in front of pandemics, natural disasters, financial fraud, violence and blatant inequalities.

We have to mobilize in solidarity with the good people of the United States (their scientists, their academics, their civil servants, their citizens including the migrants and refugees) and in defense of democracy in Europe, which means in defense of the European Union, and the idea (hated by Trump) of a federal Europe.