Luigi Zingales, a widely respected economist and professor at the Chicago Booth Business School who predicted the rise of Donald Trump to the Presidency as far back as 2011, warns that Trump’s “crony capitalism” has the potential to entirely shift American politics back to a bygone era.
Zingales claims that President Trump’s willingness to appoint friends and allies into government positions of power despite their lack of qualification, particularly in the judiciary, could permanently shift American politics toward something that looks more like Zingales’s native Italy, according to Business Insider. Zingales frequently compares Trump to on-again, off-again Italian Prime Minister Silvio Berlusconi, and says that this practice will create an environment similar to that in Italy, where politicians frequently exert their influence on positions that should be free from political interference such as the judiciary and the governors of the central bank. Zingales says that in today’s Italian government, the likelihood of judges being pressured by politicians prior to important decisions is 100 percent. While that type of behavior has been unusual so far in American politics, Trump’s persistent attacks on the Mueller investigation and the Federal Reserve are threatening to become the new normal.
“If I expect that the other side is going to try to get to the judge [and influence his decision], I will also try to get to the judge,” Zingales said.
Should that behavior continue to be normalized without the proper checks, it would be impossible to reverse.
“It’s like when everyone waits in line to get the bus, or the ski lift, or to go to the office. As long as everybody is in line, you don’t like it, but you join the line as well,” Zingales said. “If one person deviates, you yell at him. If two deviate, you yell at them. If three deviate, you join them. At some point, if everybody goes, you can’t be the only idiot still waiting in line.”
Zingales believes that the risk of America descending into crony capitalism will increase the longer that President Trump remains in office.
“What remains to be seen is to what extent this can be seen as an aberration, and then the world returns to a normal situation moving forward, or to what extent this is a permanent shift in the way politics is run in the United States, and the way people perceive it,” Zingales said. “The negative impact is very dependent on this. My suspicion is that once people develop a reputation, it’s very hard to go back. Once you shift the game, changing back ain’t easy.”
The United States has seen such times in the past, and some lessons can be learned from history. During what is known as the Gilded Age, a period between the Civil War and American imperialism at the height of the Industrial Revolution, the American economy was dominated by monopolistic business tycoons and American politics was ruled by patronage, and often appointments were made by personal or political affiliation and not by merit. During this time, seven of the ten richest Americans were alive, orphan children hustled for a living in the streets of New York, snake-oil salesmen proffered their wares, meat-packing plants allowed filth to spoil their product, and the economy went through a boom-and-bust cycle of wild growth and depression. The work of U.S. Presidents Chester A. Arthur, who fought patronage to create a merit-based system, and Theodore Roosevelt, who took on corporate politics like perhaps nobody else ever could, transformed our nation into something more like the one we have today.
Biographer Scott Greenberger, in an interview on C-SPAN, talked about the positive impact of Arthur and Roosevelt on American life. “[C]ivil service reform was important in retrospect and in the sweep of history, it’s important because as in later years… the progressives and Teddy Roosevelt [and] later presidents wanted to imbue the federal government with more powers and… take a more active role in everything from… safeguarding the safety of food and drugs to… the national parks,” Greenberger said. “All of this stuff needed to be done and it needed to be overseen by people actually knew what they were doing.” The transcript has been edited for written clarity.
The Presidency of Donald Trump so far has most often been compared to that of Warren G. Harding. According to the Los Angeles Times, there are some distinct comparisons between the two. Harding made fiery but vague speeches during his 1920 campaign, the centerpiece a promise of “returning America to normalcy” in the postwar period. He championed tax cuts, immigration restrictions, tariffs, and a rolling back of the progressive reforms of his predecessors. He was a champion of “America First” and opposed U.S. entry into the League of Nations. Harding littered his administration with friends, relatives, and cronies, and had one of the most scandal- and corruption-laden presidencies in American history. Harding faced the threat of impeachment, and perhaps would have been had he not died in office.
The Harding presidency also established the core group — Vice President Calvin Coolidge, Secretary of Commerce Herbert Hoover, and Secretary of the Treasury Andrew Mellon — that would establish irresponsible short-term economic policy that eventually led the nation into the Great Depression. Recently, Business Insider reported that over 1,100 economists sent a letter to President Trump claiming that his administration was making the exact same mistakes that those did.
Luigi Zingales’s warnings perhaps should be considered, as he seems to know what he is talking about. In an unpublished chapter of Zingales’s 2011 book Capitalism For The People, Zingales predicted the rise of Trump or someone like him to the American presidency. Sadly, Zingales elected to withhold the chapter from final publication, as his colleagues who read the book beforehand felt that the idea was so far-fetched that it would hurt Zinagles’s reputation.
“One of my colleagues who was kind of enough to read the first version told me that I was crazy, that I would lose credibility to the book if I were to keep that in,” Zingales said.