Donald J. Trump was elected the 45th President of the United States through the Electoral College System, although he lost the popular vote to his opponent. He has never held a government job or elective office before, having spent his life as a businessman.
Author: Bob Martin
Donald J. Trump was elected the 45th President of the United States through the Electoral College System, although he lost the popular vote to his opponent. He has never held a government job or elective office before, having spent his life as a businessman. Also in modern history, the country has never before elected President a candidate with no prior government, military or elective office experience. Both Donald J. Trump’s election, as well as one of his signature goals, (the reversal of the Dodd-Frank financial market regulations) can be seen simultaneously as an affirmation of the Polanyi Pendulum within the neoliberal capitalistic economic model, as well as an example of the Pendulum’s double and half movement(s).
Keywords: Capitalism, Depression, Dodd-Frank, Electoral College, Great Recession, Market Risk, Regulations, Self-Regulated Market, Polanyi Pendulum, Popular Vote
Since the advent and early years of capitalism, and into the present, it has always had an operational cycle and as such is subject to various shocks and the resulting economic fluctuations, depending on the particular economic, global or input variable that is affected. The long-term performance of the economy is equally affected by the growth trends over time as well as the period(s) of stagnation and the effects of some economic shocks can be temporary or permanent (Nelson & Plosser, 1982). These fluctuations represent the natural cycles of the economy and shocks to the economy are reflected in, and can also influence the nature and timing of the economic and business cycle.
Economic shocks can be global in nature, (like the Arab oil embargo in the 1970s) or limited to a particular nation. If such an economy is a leading actor in the global economy however, like the United States, shocks to such an economy will have global implications, as it did for the Great Recession that lasted from December 2007–June 2009. The Great Recession rivaled only the Great Depression in its depth, thus the reason for its name. According to the National Bureau of Economic Research (NBER) during the Great Recession the economy shed 8.7 million jobs between December 2007 and February 2010 resulting in a 5.1% decrease in the GDP.
The Great Recession had a catastrophic and lasting effect on the society, its polity, its people and on its institutions. Investment banks failed and were acquired there were bankruptcies across the economy, and the federal government stepped in to save the banking, financial services and other sectors in the economy with trillions of dollars in loan guarantees. Not unexpectedly for crises of this nature, there was the search for villains and victims of the catastrophe, bundled with calls for reform.
According to Samuelson (2011) the story of the Great Recession is not so much about crime and punishment per se, (although there were) but about boom and bust. Samuelson noted that the boom started with the successful suppression of inflation from 1979 into the 1980s that led to low interest rates and a more than 25 year path of low interest rates and unprecedented growth in the capital and housing markets leading to “steady and dependable prosperity” that in turn fueled the engine of the economy. This in turn fueled extraordinary and “reckless borrowing and overspending” from the housing bubble, that fed “corrupting overconfidence,” that led to “financial speculation and regulatory lapses” culminating into the bust. This, he believes, holds important lessons for the society, financial irregularities, policy mistakes, economic miscalculations, deceits and crimes notwithstanding. He noted that sustained economic prosperity over time can still lead to collapse and that the economic panics and fluctuation we have had since the 1700s are not extinct, the economy is still subject to them as part of the economic cycle and the nature of capitalism.
It is out of this experience that in July 2010 the United States (Democrats) Congress crafted and the President signed the Dodd-Frank Act, formally known as the (Dodd-Frank Wall Street Reform and Consumer Protection Act). Known as the Dodd-Frank Act, the legislation was designed to prevent another Great Recession by regulating the capitalists of the financial services sector and their attendant risk. The regulations number 400 pages and represented the demand by society for protection from these risks. It was the most significant, lasting and substantive response to the financial crisis of the Great Recession (there were other legislative responses to the crisis, including TARP and the American Recovery & Reinvestment Act).
Dodd-Frank represents the most critical reform initiative by the Obama administration to the Great Recession and provided regulatory authority for the United States Commodity Futures Trading Commission (USCFTC) to regulate the $400 trillion Swaps market . One central element of the Dodd-Frank Act is to prevent another collapse and to prevent the concept of “too big to fail” where a business would not be allowed to fail because its failure threatens the U.S. and world financial system. This concept was neutralized through the “Volcker Rule” which is represented in (Section § 619 (12 U.S.C. § 1851)) of the Dodd-Frank Act.
The rule was proposed by, and is named after former United States Federal Reserve Chairman Paul Volcker. The rule is designed to regulate (1) U.S. banks from making selected speculative investments with their own accounts and (2) U.S. banks in their relationships with Hedge and Private Equity Funds. The Dodd-Frank Act has transformed the regulatory regimen and environment for the financial services industry, reporting and market risk management in the U.S. A number of financial services entities and poliotical actors fought against the Dodd-Frank Act and in particular against the Volcker Rule. They believe the rule limits legitimate market activities, retards investment and job growth and in general, is extremely expensive to implement, and in general, is not healthy for the United States economy. Selected political actors have fought against the Dodd-Frank Act and continue to do so, particularly after the Republican Party won the U.S. Presidency in November 2016. A number of media outlets and reports, including the Republican Party’s Official Platform for 2016 have called for the repeal of the Dodd-Frank Act and the Volcker Rule in particular.
The U.S. economy has experienced a remarkable recovery from the Great Recession that officially ended in June, 2009. According to Bloomberg View The economy has grown, on average 2.1% per year since the recession ended, over-replacing the 8.7 million jobs lost during it reign and the strength of the recovery through job growth has exceeded the recovery in all the previous recessions and is still growing. In short, the recovery is continuing and has not yet ended.
The Republican Party won the U.S. Presidency in 2016 with Donald Trump as the candidate, making him the 45th President of the U.S. He won the Presidency with 304 electoral votes, compared to 227 for Hilary Clinton (7 electors did not cast their votes for their party’s candidate). Donald Trump won the Presidency, despite losing the popular vote; (he received 63.1 million votes (49.5%) compared to Hillary Clinton’s 65.9 million votes (48.0%) because of the Electoral College.
The election of Donald J. Trump as President of the U.S. amid various efforts to repeal the Dodd-Frank Act in the aftermath of both the Great Recession and the economic recovery, along with the anomaly of his election victory using the traditional model (winning the position despite losing the popular vote) can be seen simultaneously as an affirmation of the Karl Polanyi Pendulum (the Pendulum) within the neoliberal capitalist economic model, as well as an example of structural but efficacious obstacles to the Pendulum’s double movement.
In his signature book, (Polanyi, 1944) Polanyi has derided the neo-liberal economic model and economic paradigm of the Self Regulating Market, (SRM) the central element of the capitalist system. He argues that self-regulating markets (SRM) never work and that their deficiencies are within their internal system of operating and that these deficiencies have significant and severe consequences for society. These deficiencies, Polanyi argue, necessitate affirmative intervention by the State to provide a proper balance because the triad of the neoliberal capitalist model, Land, Labor & Capital are “fictitious”; land, because it was given, labor, because it is commoditized, and capital because it is a relative unit of value.
Having witnessed the stock market crash of 1929 and foreign policy failures in Europe, Polanyi argues that the pillars of internationalism and intervention were unreliable and that the self-regulated market in capitalism is like that of a pendulum, where, as the pendulum swings and labor is commoditized through profit maximization in the production function, it provokes strong counter-measures demanding protection, and as such protection becomes an obstacle to the profits of capitalism, the pendulum swings the other way demanding unfettered capitalism. Thus, as the capitalists pursue unchecked profits it leads to the destruction of society, unless society demands protection from the SRM and capitalists. As society gains protection from the SRM this is represented in the double movement of the pendulum. The Pendulum has broad antecedents and successors (Dale, 2011).
We further hold that the Dodd-Frank Act is a representation of the classic Polanyian double movement of the Pendulum, representing society’s demand for protection from the destructive effects of the SRM as represented by the Great Recession. The Great Recession is an example of the capitalists’ pursuit of profits, and thus the destruction of society, to which society reacted and demanded protection through the Dodd-Frank Act, the double movement of the pendulum.
With the continuing economic recovery since the recession, economic expansion is highly desired; (as long as it does not fuel severe inflation) it creates jobs, investment opportunities and development and it represents the capitalists’ pursuit of profits. Here again we observe the second double movement of the Polanyi Pendulum. As the Great Recession recedes from memory and as the imperatives of economic expansion and development become primary and a priority, the capitalists’ pursuit of profits now become synchronized with society’s need for further development, thus the drive for profits along with efforts to repeal the Dodd-Frank Act have now become a model of the second double movement of the pendulum as it swings away from the first double movement, the Dodd-Frank Act as the capitalists now seek increased profits from its repeal.
Both the rhetoric against and efforts to repeal the Dodd-Frank Act have complained about the high cost of compliance, how it stifles economic growth, how it retards business growth and how it is an obstacle to overall economic development. In short, as noted, the pendulum will swing as the capitalist pursues profits and removes all obstacles that stand in the way. The Dodd-Frank Act is regarded as an obstacle to profits by the capitalists and the calls for its repeal is representative of the second double movement of the pendulum, the first being the demand for the Dodd-Frank Act itself. Accordingly, we can clearly observe the first and second double movements of the Polanyi Pendulum, through the same instrument, the Dodd-Frank Act. The third (though distinct) double movement of the Pendulum can be seen through the lens of the election of Donald J.Trump as President of the United States.
In its over 240 years of existence and 44 previous Presidents, the United States has never elected as President, a candidate with no governmental, political, military or elective office experience. Even in the troughs of political fatigue, scandal and incompetence, all previous presidents had at least one or a combination of this experience matrix. Further, Donald J. Trump won the Presidency against one of the most qualified candidates in history, having, among other things, served as a two-term First Lady for the State of Arkansas, two-term First Lady for the United States, Senator from the State of New York and Secretary of State for the United States.
We hereby hold that the election of Donald J. Trump represented one distinct model of the Polanyi Pendulum’s double movement where society demanded change and reacted to the routineness, broken promises, dysfunction, gridlock, inaction, rhetoric, inauthenticity, party politics, failures and other pathologies of the current political system, that is led by “normal, regular, experienced, politically correct politicians”. Donald J. Trump represented the political “other” and this is what society demanded after the frustrations and disappointments with the traditional politics and politicians. This model of the Polanyi Pendulum’s double movement is of the same order and similar to the double movement of the pendulum in response to the destruction of the SRM. Rather than a demand for protection from a SRM, there was a demand for protection (meaning change) from the traditional political system and traditional politicians that for some, will lead to the destruction of the Republic. This reaction to the current political system is representative of a third double movement of the Polanyi Pendulum.
Through the election of Donald J. Trump with a minority of the popular vote, the question arises about the role of the pendulum in not demanding that a majority of the population’s wishes be realized with the candidate who captured the popular vote. This is a reasonable concern and it is quite obvious that there is not an overwhelming demand for the voting wishes of the majority to be realized. The answer of course is that the rules of the Electoral College system obtained. The Electoral College system is itself a Polanyi-type system that was born out of efficacy. It was put in place to offer protection from the most populous States to the less and least populous areas of the country so they can remain relevant in the exercise of choosing a President. Accordingly we offer this condition of the Electoral College’s role as a half double movement, a structural, permanent (until such time as a constitutional convention is held) and fixed half double movement that is in place to offer protection to populously weak States. The Electoral College is the half double movement, based on political and electoral efficacy.
The phenomenon of the election of Donald J. Trump as President of the United Stated broke a number of barriers in electoral politics and otherwise and the story has just begun to be written. Indeed it is possible that more barriers and other uniqueness of this Presidency and the man himself are yet to be known, revealed and developed. Through the lens of the Polanyi Pendulum however, we are able to see three and a half double movements of the Pendulum. We are able to observe the first double movement of the Pendulum as society demanded reform and protection from the SRM and capitalist development with the Dodd-Frank Act, in response to the Great Recession.
Secondly we see the pursuit of continued profits by the capitalists as the Dodd-Frank Act became an obstacle to these profits and the pendulum swung in the opposite direction with the second double movement as the Dodd-Frank Act is being repealed. In a distinct fashion, we then are able t observe a third double movement of the Pendulum by way of the election of Donald J. Trump as President; and finally, the anomaly of his election through the Electoral College system is presented as a half double movement. We further postulate that there will be further and additional shades of the Polanyi Pendulum as this unique Presidency and President continues the effort at governance.
Dale, G. (2011). Lineages of Embeddedness: On the Antecedents and Successors of a Polanyian Concept. American Journal of Economics and Sociology, 70(2), 306-339. Retrieved from http://www.jstor.org/stable/41329189
Nelson, C.R., Plosser, C.I., 1982. Trends and random walks in macroeconomic time series. Journal of Monetary Economics 10, 139-162.
Polanyi, Karl. 1944. The Great Transformation. The Political and Economic Origins of Our Time. Beacon Press, Boston.
Samuelson, R. (2011). Rethinking the Great Recession. The Wilson Quarterly (1976-), 35(1), 16-24. Retrieved from http://www.jstor.org/stable/41001064