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What a Study of Oligarchs' Second Acts Heralds for Trump 2.0
They’re usually worse off during their subsequent terms in office. So are the rest of us.
Nov 13, 2024
On November 5, Donald Trump was elected as the 47th U.S. president. Trump is an oligarch—an economic or political actor who secures and reproduces power and wealth, then transforms one into the other. And now he is in the small minority of oligarchs across history who have had second acts—having lost power or wealth, they find a way back. What can we learn from those experiences that might inform our understanding of Trump’s second term?
To answer that question, we looked at the track records of three other business oligarchs like Trump who have served as heads of state or government since World War II. Business oligarchs begin their journey by accumulating wealth, then move to power.
In our book The Oligarch’s Grip: Fusing Wealth and Power, we wrote about Chilean president Sebastian Piñera. He served two non-consecutive terms in office (2010-14 and 2018-22). His second act was decidedly worse than his first. During his first term in office, per capita income in constant dollars grew by 14%, while life expectancy expanded by 0.9 years. Sure, there were controversies, such as the appointment of Pinochet-era figures as cabinet ministers and protests over the end of the school voucher system. But, in general, Chileans felt better off.
While we are hesitant to make any grand predictions for the Trump second term based on these cases, it does seem questionable that it will be any better than the first.
By contrast, Piñera’s second term was disastrous. Per capita income rose by only 2% and life expectancy contracted by 0.8 years. The Covid-19 pandemic played a role in these outcomes, but it wasn’t the only driver. Piñera’s poor handling of a second, larger set of student protests has also led to his relatively low ranking among modern Chilean heads of state. He died in a helicopter accident in 2024.
Trump has been compared to Silvio Berlusconi, Italy’s three-time prime minister (1994-95, 2001-06, and 2008-11). We will focus on his second and third terms, which are longer. Per capita income expanded by 3.5% in that second term, and life expectancy grew by a remarkable 1.4 years. Ambitious goals aimed at constitutional and tax reform were thwarted, but, still, Italians felt better off, even if they narrowly backed a center-left coalition that removed Berlusconi from office.
His third term was dominated by the 2007-08 global financial crisis, the Great Recession of 2008-09, and the 2009-10 eurozone crisis. Italy’s economy was one of the most highly indebted in Europe, and higher interest rates led to a 6.8% GDP decline during 2008-09. Per capita income declined by 3.6% during this term, while life expectancy increased by 0.6 years. Having been ranked by Forbes as the 12th most powerful person in the world in 2009, Berlusconi resigned in 2011 as a deeply unpopular and polarizing figure.
A similar pattern of a poor second act emerges with Rafic Hariri, Lebanon’s prime minister for two terms (1992-98 and 2000-04). Per capita income grew by a substantial 44% during his first term, while life expectancy expanded in the post-civil war period by 2.2 years. But when Hariri returned to office for a second term, results were much less compelling: income up by 16% and life expectancy by 0.6 years. Political tensions led to his assassination in 2005. His son Saad served two terms as well and also left office under a cloud. A third oligarch prime minister, Naguib Mikati, is in his third term and, given the recent Israeli invasion, is unlikely to have a successful ending.
Does history offer any relief from this picture of disappointing second acts? Not really. For example, Marcus Licinius Crassus—one of the Roman Republic’s richest and most powerful men, served as consul twice (70 and 55 BCE), both times with often rival and sometimes ally Pompey. The first consulship led to the Triumvirate Alliance of Caesar, Pompey, and Crassus. The second consulship led to Crassus being named governor of the endlessly wealthy province of Syria, where he was defeated by the Parthians and died in 53 BCE.
These examples suggest some preliminary findings and cautions. First, oligarchs’ second acts generally end badly. Sometimes, external circumstances drive this result. Other times, it seems that oligarchs don’t show much evidence of learning from their first terms.
Second, many oligarchs never serve in decision-making roles as heads of state or government like Piñera, Berlusconi, or Hariri. Some have agenda-setting power through political contributions or media ownership. Others have ideological power, shaping the way we think and act. Based on our dataset at the Center for the Study of Oligarchs, we are unaware of any oligarchs who had and lost those types of power who were able to regain it. We also don’t know of any significant cases of oligarchs losing their wealth and then recovering it.
While we are hesitant to make any grand predictions for the Trump second term based on these cases, it does seem questionable that it will be any better than the first. During that first term, per capita in the U.S. rose by 2.9% and life expectancy fell by a jaw-dropping 1.7 years. That record helped earn Trump a ranking as the worst president in U.S history, according to the American Political Science Association survey.
It is difficult to imagine how Trump will be able to successfully fight the dismal history of oligarchs’ second acts.
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Instead of Blaming Policymakers for High Prices, Thank Them for High Wages
The inflation of recent years was—sadly—inevitable; the fast wage growth over the past four years was made possible entirely by proactive policy decisions.
Oct 10, 2024
Last week, the Bureau of Labor Statistics reported that 254,000 jobs were created in September and that job growth in both July and August was stronger than initially reported. This report was just the latest confirmation of the extraordinary strength of the U.S. labor market in recent years. This strength is what led to real (inflation-adjusted) incomes recovering far faster after the Covid-19 recession than they have following previous recessions. Even better, real wage growth has been by far the fastest at the low end of the wage scale, which has reduced inequality.
This labor market strength was also 100% a policy choice. Unlike previous business cycles, policymakers passed fiscal relief and recovery measures at the scale of the shock, and it proved that low unemployment could be restored very quickly after recessions so long as this policy lever was pulled with enough force.
Public appreciation of this accomplishment has been blunted by the outbreak of inflation in 2021 and 2022. While inflation has been steadily reined in since early 2023, the public’s perception of the economy remains soured by it. In a strict economic sense, the public mood seems odd: If real wages are higher and more equal now than at equivalent points in previous recoveries, why isn’t the public mood much better?
Policymakers who chose not to target significantly higher unemployment rates to tamp down inflation made the correct judgement that inflation was mostly driven by shocks that would fade even with labor markets remaining strong.
One reason put forward as to why the public dislikes inflation even if real wages and incomes are rising is pretty persuasive: Workers see wage growth as something they individually achieved while inflation was a policy mistake inflicted on them. This outlook is understandable, but it’s totally wrong.
Policy choices influence wage growth every bit as much as inflation—and sometimes more. When wage growth is slow, policymakers deserve blame—not workers. When wage growth is strong, however, it is because policy has done something right, not because workers spontaneously decided to become more productive or harder-working.
It is deeply damaging to U.S. policy debates that this is not more broadly appreciated.
For decades when wage growth for the vast majority of workers was anemic, these workers were often told it was because they weren’t skilled enough to keep pace with the demands of technological changes and globalization. This was false. It was intentional policy decisions that suppressed wage growth in those decades, policy choices meant to redistribute income upwards toward capital-owners and corporate managers.
In the past four years, workers have seen fast wage growth not because they are working more productively or harder—U.S. workers have always been the most productive in the world and have always worked hard. What changed was that policymakers decided to target a rapid return to sustained low unemployment, keeping unemployment below 4.5% for the longest stretch of time since the Vietnam War. In 2021, these tight labor markets were also accompanied by unprecedently large and expansive unemployment insurance benefits and cash transfers to households. These public supports gave workers more breathing room than ever before to be choosy about which jobs they took. These policy choices are why wages grew so fast so early in the pandemic recovery.
In fact, over the pandemic recovery, the policy fingerprints on fast wage growth are far clearer than those on too-high inflation. Inflation after 2019 was driven by two global shocks—the pandemic and the Russian invasion of Ukraine. Inflation accelerated everywhere in the advanced world, and the precise amount by country was wholly unrelated to policy choices they made.
The most common critique of policymakers is that the Federal Reserve should have engineered softer labor markets and tolerated higher unemployment to break inflation’s momentum. This thinking is wrong. There is a long and extremely well-developed literature nearly unanimously showing that higher unemployment has larger and more reliable effects in reducing wage growth than it does in reducing inflation.
Policymakers who chose not to target significantly higher unemployment rates to tamp down inflation made the correct judgement that inflation was mostly driven by shocks that would fade even with labor markets remaining strong. That is, they chose to not sacrifice wage growth (and the jobs of millions of workers) to pull down inflation.
In short, the inflation of recent years was—sadly—inevitable. The fast wage growth over the past four years was made possible entirely by proactive policy decisions. Getting this straight is crucial for getting better policy going forward. And it should make the public much more appreciative about the macroeconomic choices made since 2020.
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'Global Oligarchy' Reigns as Top 1% Controls More Wealth Than Bottom 95% of Humanity
"The ultra-wealthy and the mega-corporations they control are shaping global rules to serve their interests at the expense of people everywhere."
Sep 23, 2024
A report published Monday by the humanitarian group Oxfam warns that decades of intensifying inequality have left the world in the grip of a "global oligarchy" under which the richest sliver of humanity owns more wealth than nearly everyone else combined—a state of affairs that undermines democratic institutions and international cooperation on climate, pandemics, and other crises.
Oxfam's
analysis of data from the investment banking giant UBS found that the fortune controlled by the top 1% is now larger than the collective wealth of the bottom 95%.
Such inequality pervades the global economy, Oxfam noted, with a small number of corporations dominating key sectors. Nearly half of the global seed market, for example, is controlled by just two corporations, Bayer and Corteva. At the same time, just three U.S.-based financial behemoths—Blackrock, State Street, and Vanguard—oversee nearly 20% of the world's investable assets, around $20 trillion.
What's more, such massive corporations are increasingly run by billionaires: According to Oxfam, a billionaire either heads or is the top shareholder of more than a third of the world's leading 50 corporations.
"While we often hear about great power rivalries undermining multilateralism, it is clear that extreme inequality is playing a massive role," Oxfam executive director Amitabh Behar said in a statement. "In recent years the ultra-wealthy and powerful corporations have used their vast influence to undermine efforts to solve major global problems such as tackling tax dodging, making Covid-19 vaccines available to the world, and canceling the albatross of sovereign debt."
"Enabled by rich nations, the ultra-wealthy individuals and corporations they control that benefit from and perpetuate extreme inequality have long impeded international efforts to create a more equitable society."
Oxfam released its new report, titled Multilateralism in an Era of Global Oligarchy, ahead of the United Nations' annual high-level general debate, whose 2024 theme is "leaving no one behind: acting together for the advancement of peace, sustainable development, and human dignity for present and future generations."
The extreme concentration of global wealth at the very top directly undercuts such objectives, Oxfam argues in its new report, with the ultra-rich using the wealth they've accumulated to influence policy decisions that fuel destructive inequities.
"Extreme inequality is, consequently, both a cause and effect of a movement toward global oligarchy, broadly defined here as the ability of the ultra-wealthy to shape political decision-making in ways that increase their wealth," the report notes. "Democracies are afflicted, as the ultra-rich—often through the powerful corporate interests that act on their behalf—can tilt policymaking in their favor at the expense of the majority. Nor is the movement toward oligarchy confined by national borders. It is global, impacting political decision-making within countries and at the international level."
Behar said Monday that "the shadow of global oligarchy hangs over this year's U.N. General Assembly."
"The iconic U.N. podium is increasingly feeling diminished in a world in which billionaires are calling the shots," Behar added.
Oxfam argued the massive wealth gap between the rich and everyone else—as well as the chasm between the so-called Global North and Global South—is antithetical to the kinds of international cooperation needed to tackle existential emergencies, including the worsening climate crisis.
The report points to longstanding efforts by multinational corporations, ultra-wealthy individuals, and rich countries to obstruct efforts to establish more progressive global tax structures, depriving lower-income countries of revenue that could be used to combat the climate emergency and improve healthcare and education systems.
Corporations have also wielded their influence to tank efforts to reform patent laws that give pharmaceutical companies monopoly control over lifesaving therapeutics and vaccines, which had
devastating consequences during the Covid-19 pandemic.
"Enabled by rich nations, the ultra-wealthy individuals and corporations they control that benefit from and perpetuate extreme inequality have long impeded international efforts to create a more equitable society, especially those led by Global South countries," the new report states. "The movement toward global oligarchy ultimately perpetuates neocolonial relationships, shaping policy in ways that further increase the wealth of ultrarich individuals, mostly in the Global North, at the expense of the Global South."
Oxfam argued Monday that only global solidarity "can reverse the movement toward global oligarchy."
"Global South governments and civil society organizations are leading the push for a [World Health Organization] pandemic treaty with strong provisions on technology transfer and benefit-sharing, a U.N. tax convention with ambitious standards on taxing corporations and the rich, and a new international debt architecture that facilitates comprehensive debt restructuring," the report states. "These initiatives are critical opportunities for the international community to replace division with solidarity, a necessity for addressing other pressing issues such as climate change."
"Ultimately," the report adds, "a more equitable international order without extreme concentrations of wealth—where corporations pay their fair share, global public health is prioritized, and where all countries can invest in their own people—benefits everyone."
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