Home > Uncategorized > Trumponomics and social prosperity

Trumponomics and social prosperity

from Robert Locke

The management principles Trump evokes in Think Big and Kick Ass are those for self-enrichment reminiscent of robber barons during the Gilded Age. In his election campaign Trump promised to use his knowhow to restore prosperity to the dispossessed white middle class in rust belt communities. Will his management principles, if they served him and other billionaires well, do the same for the white middle class communities? This is a question economists seldom ask since they exclude management systems and methods from their analytical purview. It is also a question that Trump has not asked, inasmuch as he attributes the impoverishment of industrial America’s white middle class to NAFTA and other trade agreements, misguided environment policies that destroy jobs, e.g., in coal-mining regions, and tax provisions that encourage corporations to move manufacturing off shore. If economists and Donald Trump ignore the management question, historians have not, and for good reason.

History involves specificities that differ in time and place. The specific time referred to here in US history is when in the 1980s and 1990s the old staple mass production industries (automobiles, steel, rubber, consumer electronics, and their suppliers) succumbed to Japanese competition. Trump is a great believer in what the Germans call the Führerprinzip (leadership principle), which he thinks is the key to success. A good leader is needed to harness the will and energy of the people in the enterprise and the nation, for “without leadership,” he says, “organizations slowly stagnate and lose their way… Leaders influence behavior, change the course of events and overcome resistance and therefore leadership is regarded as crucial in implementing decisions successfully.” 

But in the timeframe under consideration, American director primacy forms of management did not protect American mass production industry and the blue collar populations it succored nearly as well as the stakeholder forms of management that had developed in Germany (and other northern European countries) after the war as alternate forms of firm governance (Albert, 1993).

That the German story is radically different from the American can be demonstrated through comparative analyses of the top twenty firms in each country, ranked by revenues (2012):


  1. Exxon AT&T
  2. Wal-Mart Valero Energy
  3. Chevron Bank of America Corp
  4. Conoco-Philips McKesson
  5. General Motors Verizon Communications
  6. General Electric JP Morgan Chase & Co
  7. Berkshire-Hathaway Apple
  8. Fannie Mae CUS Caremark
  9. Ford IBM
  10. Hewlett-Packard Citi Group
  11. AT&T
  12. Valero Energy
  13. Bank of America Corp
  14. McKesson
  15. Verizon Communications
  16. JP Morgan Chase & Co
  17. Apple
  18. CUS Caremark
  19. IBM
  20. Citi Group

(Source: Stahl, 2013, 59)


  1. Volkswagen
  2. E.ON
  3. Daimler Robert Bosch
  4. Siemens RWE
  5. BASF Rewe Group
  6. BMW Edeka Group
  7. Metro Audi
  8. Schwarz
  9. Deutsche Telekom Deutsche Bahn
  10. Deutsche Post Bayer
  11. Aldi Group
  12. BP Europa SE
  13. Robert Bosch
  14. RWE
  15. Rewe Group
  16. Edeka Group
  17. Audi
  18. Thyssen Krupp
  19. Deutsche Bahn
  20. Bayer

(Source: Ibid., 61)

Some firms on each list are classifiable under the same rubric, e.g., retail giants (in the US, Wal-Mart and McKesson; in Germany, the Aldi and Edeka Groups). Others are famous oil and energy firms, mostly on the US list. But there are two big differences between the lists that are of interest here.

One is that among the top twenty US firms there are many drivers of financialization (Berkshire-Hathaway, Fannie Mae, Bank of America, JP Morgan Chase Co, Citi-Group, and GE Financial), or US firms that are the creation of financialization (Hewlett-Packard: IPO 1957; Apple: IPO 1980). On the German list, there are none, i.e., not one is a financial institution, not one is a stock market IPO creation.

The financialization referred to is not limited to the concentration on financial outcomes that had become the preoccupation of top management in large firms, although that is part of it. Rather it is the change during the last three decades of the 20th century from viewing a business as a vehicle for earning “returns on investment… based on the value created by productive enterprise” to viewing a business “as assets to be bought and sold for maximizing profits through financial strategies” (Ball & Appelbaum, 2). This is the world that Donald Trump knows and in which he operates.

Read more in Trumponomics, firm governance and US prosperity

  1. Risk Analyst
    April 19, 2017 at 5:29 pm

    Nice paper. I especially liked the brief but targeted definition of financialization, which is a term many use with contempt but few seem to be able to define other than financial markets getting big is bad somehow.

    • dmf
      April 19, 2017 at 8:09 pm

      [audio src="http://files.libertyfund.org/econtalk/y2017/Forooharfinancial.mp3" /]

  2. April 19, 2017 at 9:34 pm

    This is an excellent post, but readers might need help in navigating. The apparently quoted part is from page 7 of Locke’s paper (click “Read More” for the full paper). I highly recommend reading the full paper. On page 7 is this cogent quote:

    “Dünhaupt describes five ways in which financialization changed executive behavior: 1. It shifted the basis of enterprise finance from banks to capital markets; 2. It reinvigorated the “rentier” class that had been on the decline by creating institutional investors (e.g., pension funds) that base investment decisions solely on stock prices and short-term return on investment; 3. It linked financial trading to new financial institutions (e.g., investment banks, hedge funds, and private equity firms) and new financial instruments (e.g., derivatives, stock options, and credit swaps); 4. It stressed profit-making through financial activities instead of through real productive activity; 5. Under the guise of increasing shareholder value in a firm, it subordinated the interests of stockholders in nonfinancial firms to those of directors (and, implicitly, those of Wall Street analysts, investment bankers, and large investors) (Dünhaupt, 2011, 10).”

    Investigating each of these items is worth a whole semester of economic reality.

  3. April 20, 2017 at 9:56 am

    Robert, I agree with almost everything you say here. But I think we need to expand our view to understand the American side of the equation. Before the dominance of the shareholder value view in American corporations, along with the aim to make each transaction and each company “tradeable” American companies were dominated by the profit maximization for the owners. In other words, not much has really changed in American companies since 1870. Quick profit, cheat if necessary (especially workers), poor quality control (during the Civil War half of all rifles sold to the Union Army failed), corruption (payoffs to government officials for contracts), no guaranteed salary or permanent employment, and so on. Actually, in some ways the corporations after World War II were better in many of these areas. This was the result mostly of the work of progressive politicians, ministers, and economists. Their influence waned, however, about 1970. After that the small government, no regulation, every person on their own philosophy of people like Ayn Rand and Frederick Hayek began to take charge of defining liberty and business. Mostly to the detriment of anyone who was not wealthy and/or politically powerful. In other words, they returned the US to the undemocratic, sinister, dark, and cruel money world of 1900. They’ve also performed masterfully in destroying American life and work. Where Germany and Japan got an opportunity for change and new directions after World War II, the US returned to old ways that have at this point decimated all but the top 10% of the income hierarchy. But that was the purpose of the return to the old, after all. To destroy the notion that the non-wealthy and non-politically powerful deserve anything other than the leftovers of society. Leftovers for the leftovers.

    • robert locke
      April 20, 2017 at 1:56 pm

      You read the history and present the story correctly. But the very scenario you present and the comments and posts we read on this blog every day suggest that the results of the “return to old ways” are quite unacceptable. Bon courage, mon ami, What is needed is leadership of the sort you provide in your voice here, which brings clarity to the sort of ideas that are necessary in the fight, a constant one, against plutocracy.

      • April 22, 2017 at 5:48 am

        I wish that leadership and speaking out could solve these problems. But they have not shown themselves effective. My home State of TX is conservative in the traditional sense. Quite and polite, respectful of elders, and spending to solve real problems. But in the last 15 years the state’s government has gone insane. This is from the local papers.

        Lieutenant Governor Patrick also championed a “bathroom bill” modeled on the one North Carolina recently repealed, which would require transgender people to use public bathrooms that match the sex on their birth certificates. When the N.F.L.,
        shortly after this year’s Super Bowl in Houston, dared to suggest that the law would be a factor in scheduling future N.F.L. events in Texas, Governor Abbott — in a “me
        too!” gesture to Mr. Patrick’s pandering — told league officials “to get the hell out of politics.”

        The Senate passed the bathroom bill in March. The Texas Senate also recently passed a school vouchers bill that would drain millions from public school funds to pay for private tuition. Having starved state government for years, the Legislature is now determined to make it harder for cities and counties to raise money for themselves. The latest crusade began last spring, when Paul Bettencourt, a Republican state senator from Houston, used bogus math to whip local taxpayers into a frenzy over alleged property tax increases. The result
        was the passage in March of a Senate bill that limits the ability of cities and counties to raise the revenue needed to pay for education, health care and public safety.

        All this happened, and more despite the appearance of dozens of witnesses before the Senate opposing these and similar proposed bills. The Capitol Press included a picture with its coverage of Lt. Governor Patrick as he told witnesses their testimony would have no effect and is worthless. Real democrat is Patrick, right? You see the same behavior at Congressional and Senatorial town halls.

        The TX papers did see some light at end of the tunnel, however. “There are two silver linings in the thundercloud of extremism billowing over Texas. One is the potential for a revived moderate middle that believes in fact based public policy. The other is the groundswell of public engagement.

        As a veteran local lobbyist joked recently, the only thing standing between Texas and the Middle Ages is the House, ably presided over by Speaker Joe Straus, Republican of San Antonio. In contrast to the Senate’s far right agenda, the House’s commonsense priorities include remodeling our outdated school finance system and advancing mental health reforms. It remains to be seen whether moderates in
        the House have the votes to stop all the bad bills coming their way from the Senate.”

        I grew up in San Antonio. It’s not the first nor will it be the last time TX is saved by San Antonio. But I continue to work with the non-crazies in TX. The crazies are a minority in TX as they are in most of the US. But since most are sociopaths they present a particularly difficult public welfare problem.

      • robert locke
        April 22, 2017 at 9:23 am

        My family came from Texas, before the dust bowl exodus. Because my father (born 1903) was taken to Calif. by my grandfather, he got a high school education. My mother did not. Born 1907 in east Texas, she went to the 8th grade, meaning through the 7th, which was hardly exceptional for white sharecroppers. So there was a difference between Texas and California education long ago. My father said, Texans are “liars, braggarts, and anti-union.” He had no nostalgia for the place. But LBJ was a progressive. Can the democrats make a comeback. We hear rumblings about it. My wife, who is Polish, says, what astonishes her the most about Americans is that they have and accept the most simple minded explanations to why questions. And she has never met my Texas relatives.

      • April 23, 2017 at 6:29 am

        Robert, as I said TX when I grew up there (born Tyler 1946) was a conservative state. Conservative like Edmund Burke. The Enlightenment emphasized reason, the perfectability of humans, and potential for humans, through science to construct utopia on Earth. Burke eloquently argued for the other side. He pointed out the limits of reason, while extolling the primacy of intuition, along with the wisdom of the ages, on which tradition is based. Burke saw colonialism as bad, radicalism as dangerous, and democracy as a threat to social stability. Governmental conventions are spiritually based and not to be tinkered with lightly. He also concluded that humans can never be equal, that God (generic, not in a specific religion) was important for social stability, “prescription, presumption and prejudice” are the basis of conscience, history is the unfolding of a design wrought by God, government authority is based on virtuous principles rather than a social contract, and there is a collective intellect, seeped in ancient wisdom, that people inherit and culture safeguards and transmits. We find much of this in TX from its founding. Since then capitalism, consumerism, and religious imperialism have destroyed and replaced much of TX’s original conservatism. The politicians I quoted are the signs and warning of these changes. Burke’s conservatism is being replaced (or has been replaced) by an evil, mean, cruel, and remorseless hatred and immorality that is rotting TX and many other states. Good sense may return. We can only hope and work for that day. The founders of the US mixed the Enlightenment (Locke, etc.) and Burkean conservatism. But no one today seems to understand that. As a result we may lose both – the Enlightenment and Burke’s conservatism.

      • robert locke
        April 23, 2017 at 9:36 am

        What part has university studies in the humanities and social sciences played in the transformation you described. I am thinking of post modernism to which people in economic studies and management “sciences” have paid little attention, in contrast to people in history, social sciences like anthropology, and humanities in literary studies. In my opinion post-modernism, if it brought out the flaws of modernism, was a negative force in higher education, precisely because it cast doubt on the modernist vision of progress. I put it this way in my 2011 book with JC Spender Confronting Managerialism (p. 100).

        “Postmodernism undoubtedly ended the authoritative narrative in the humanities when it introduced new voices into the dialogue, but it also, inadvertently perhaps, weakened the humanites within the university. It has been, its critics in the humanities say, a negative if not destructive force, because it has torn down the enlightenment project without putting any ethical norms in its place. Its critique of the humanities (as Beyer notes in Postmodernism and religion) amounts to “an unjustified betrayal of the modernist project of building an ever better world”

    • April 23, 2017 at 1:53 pm

      Robert, I generally agree with your assessment of post-modernism. The controversy was quite strong for several years from 1960 to 1975 at the University of Texas. UT changed quickly during that period as TX “growth”enthusiasts changed the entire State. The first international airport in TX was completed, Interstate 35 through TX was completed, major non-oil and non-agricultural businesses were lured to TX. Part of this project was the transformation of UT from a fairly good regional university into an international university with an international reputation and student body. This latter part created some problems as famous and award-winning faculty was hired for UT. These brought some unfamiliar ideas to UT and UT students. One of these was post-modernism. Post-modernism was rejected and removed from the courses – mostly in history, literature, and drama.

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