Why Oligarchs Want a Recession
My debut in Labor Notes
Labor Notes has been one of those publications that has helped educate me about workers’ perspectives on the economy. As such, it’s been crucial to my total rethink of foreign policy since about 2018. So I’m psyched that I finally got to write for them. The following piece, which just dropped in Labor Notes, makes a key but not-well-understood observation: Ruling-class interests have become diametrically opposed to working-class interests because most of America’s billionaires make money in ways that are totally disconnected from normal indicators of a healthy national economy. Yes, the MAGA folks will tolerate a recession, and some even want it.
Read the whole thing here or below. ✌️
A recession is looming. Trump himself recently affirmed that his economic plans would induce a recession in the near term. He remarked when asked as much by an interviewer, “There is a period of transition because what we’re doing is very big.”
And yet, before Trump crashed the stock market last week with his global tariff regime, America’s CEOs had the highest confidence in the U.S. economy that they’ve had in three years, according to a nationwide survey in the early weeks of the Trump administration.
And Trump has simply been carrying out the promises he’s long made. His global tariff plan, for example, was outlined in 2023. Why, then, have C-suiters remained quiet cheerleaders for Trump while he implemented an economic vision that no sane person would endorse?
Because lavish tax cuts, deregulation, and an environment friendly to union-busting are just as valuable to most CEOs as a growing economy. What they lose in the stock market, they will more than make up in surplus labor, a fire sale on distressed assets, and Trump’s promise to totally eliminate the capital gains tax.
The rich are not a monolith, but the financiers and tech oligarchs (very rich businesspeople with political power) closest to the Trump administration accumulate wealth not necessarily by producing things or investing in societal infrastructure, but rather through a mix of speculation (gambling), amassing predatory private equity, and corporate welfare from the government.
The MAGA-aligned capitalists no longer require a healthy national economy to build their wealth. The working class still does. From their perspective, an economic downturn will punish labor. Win-win, for them. So now the interests of America’s ruling class are almost entirely contrary to advancing labor’s well-being.
For that reason, it is a mistake to endorse—as United Auto Workers President Shawn Fain recently did—Trump’s regime of global tariffs. Tariffs are a crucial part of a scheme that uses prolonged economic recession to benefit the rich while disciplining labor.
THE GREAT ECONOMIC DIVERGENCE
The Trump economic agenda is accelerating a great divergence that’s already underway between workers—who rely on a stable, growing economy—and the wealthy, who do not.
The gap between wages and productivity has steadily grown since the 1970s. Workers are producing more and more value per hour of work, but they’re not bringing home correspondingly more pay. The national economy is rigged so that wealth inequality now increases over time regardless of how productive the economy is, and nearly all gains from productivity go to owners of capital.
Wealth inequality has also grown because of the decrease in union density. The share of the national income going to the bottom 90 percent of earners has decreased dramatically since the 1970s. This shiftis stark: if the distribution of income had not changed from 1975 to 2023, workers would have earned an additional $79 trillion over that period.
Such extreme concentrations of wealth distort both politics and geopolitics in favor of those with fat pockets, at the expense of those of us who work for a living. The government under Trump, Vance, and Musk makes the state work almost exclusively for the interests of America’s richest.
A study of Trump’s “crony capitalism” (where business owners profit from a close relationship with government leaders) found that, during his first term, businesses connected to Trump “generated abnormal returns of 3.7 percent over a 21-day post-election period… connected firms had better performance, received more government contracts, and were less subject to unfavorable regulatory actions…”
Countless experts have decried the corruption of the Trump coalition, but what’s happening is more pernicious than politicians on the take or rule by a mafia don. Consider three facts:
The biggest defense-industrial darlings of Silicon Valley—Anduril, Palantir, SpaceX, Fortem, Skydio, and a half-dozen more—draw most of their revenue from contracts with defense, intelligence, and border security agencies. These oligarchs’ business model relies on selling a menacing vision of the world that diverts social spending into national security.
Trump’s newly announced “strategic crypto reserve” exposes the U.S. financial system to the inherent volatility of cryptocurrency—a speculative asset—while also making large crypto holdings too big to fail. Which means that taxpayers will have to come to the rescue when crypto kings like Marc Andreessen experience a crash.
Most “investment” by U.S. firms—which has been declining at any rate—involves merely changing ownership of existing assets, not producing new equipment, commodities, or services.
Taking these three facts together, we see an economy where those who benefit most are untethered from traditional measures of economic stability like full employment.
ZOMBIE ECONOMIC NATIONALISM
This is the context we need to use when judging Trump’s economic nationalism. Tools like tariffs can sometimes be useful as part of a strategy to get foreign firms to improve workers’ safety conditions or pay a fair wage (by keeping companies from dumping products made by low-wage workers). They can also be used to buy time for an industry the state wishes to grow before it becomes globally competitive.
But Trump’s tariff regime is part of a political project that threatens workers everywhere.
The U.S. is already staring down a recession. When Trump imposes tariffs, foreign governments have little choice but to add to the pain by responding with retaliatory measures in kind. China, Canada, and Mexico have all imposed retaliatory tariffs on imports from the United States. China, Japan, and South Korea met recently to coordinate a joint response to tariffs as well. More countries are certain to follow.
In turn, exports from American firms will become less competitive in foreign markets. Global growth will suffer as export-based economies—which include much of the global South—find themselves increasingly cut off from U.S. consumers. As growth declines, nationalist demagoguery rises, along with military spending everywhere. The result is more combustible geopolitics, with the workers of the world press-ganged into subordinating their interests to the needs of their countries’ politicians amid global conflict.
In an alternate timeline, tariffs could be part of a strategy to strengthen worker power and expand good union jobs. That would mean using tariffs to penalize production abroad only when exporters exploit labor or cause excess harm to the environment.
Such labor-friendly economic policies would help expand markets abroad for U.S. production by championing debt reduction and development opportunities for the global South. And they would support U.S. efforts to persuade foreign exporters to pay fair living wages based on local conditions, thereby reducing the need for tariffs.
If foreign policy really worked for the American people, it would not be stoking conflicts abroad. Instead, it would be leveraging the carrot of U.S. market access to encourage wage growth in exporting countries, halting the race to the bottom that pits our workers against theirs.
None of that is part of the Trump administration’s tariff scheme. Quite the opposite.
Pretty darned good for a debut