2010s >> 2018 >> no-1372-december-2018

Donald Trump: bog standard capitalist

US politics has reached the stage where the plutocrats of either party have ceased to pretend to any real principled difference but are instead using allegations of criminality and corruption against each other. This is a sound tactic, since there is no clean way to the top of US politics: it takes money, and the smiling acceptance of the people with money to get to the top. The vast scale of any campaign means there will be reporting, recording and donating errors somewhere.

The New York Times (2 October) has joined in this game of mud flinging, with a deep investigation into Donald Trump’s business and tax affairs. Journalists David Barstow, Susanne Craig and Russ Buettner have dug through thousands of public documents relating to Donald Trump’s father’s business empire, to see how they relate to the President’s current wealth.

Donald Trump has come to power as a representative of the naked rule of wealth: he has filled his cabinet and other appointees with the wealthy and the sons and daughters of the privately wealthy. He does so without the usual hypocrisy of appointing those who have served their time in lucrative public service.

Much of the New York Times’s revelations were hardly surprising. It was widely known that Donald Trump’s father, Fred, was a wealthy landowner who possessed many rented properties in New York. It was widely known that his father was a shrewd and ruthless business operator. The reporters note that Fred Trump managed to receive large amounts of Federal loans as part of New Deal home building schemes. The article suggests he received as much as $26 million of cheap loans from the government. He also knew how to work the Democrat Party machine that controls much of politics in New York state and city, and backed up his business empire with a team of legal and financial professionals to protect his interests.

What the report showed, though, in detail, was just what a typical capitalist Donald Trump really is.

Inherited

Much of the report concentrated on debunking Trump’s claim that he started his business with a $1 million loan from his father, that he repaid (with interest). It is interesting to see that people could take this with any sort of face value of making him a ‘self-made’ billionaire. $1 million in the 1970s was a very considerable sum (and for most people still is). What the New York Times revealed was that Fred Trump actually siphoned millions of dollars into his son’s businesses, including refloating them when they ran into financial difficulty. One incident the reporters relay involves Trump Snr. sending a flunky to one of his son’s casinos to buy $3.5 million of gambling chips, and then placing no bets.

Fred Trump actually started his financial management early, apparently appointing Donald a director of one of his firms when he was still a toddler, accruing a salary worth hundreds of thousands of dollars. This continued throughout Fred’s life, as Donald, and the other Trump children, were appointed directors of firms which then received transfers from other parts of the Trump empire. The usual approach was to transfer properties with a low estimate value, before selling them off at a huge market value many times greater. The New York Times identified 295 such income streams. They estimated a total transfer of $413 million (in current prices) from father to son, much of it bypassing gift and inheritance tax rules.

A particularly naked scheme saw the establishment of a shell firm, called ‘All County Building and Supply Maintenance’ through which Fred Trump channelled the procurement for his managed apartment. The shell company inflated the prices of the goods bought, effectively allowing Fred Trump to channel money to his children (the nominal owners of the firm) in the form of corporate profits. A side benefit was that under New York’s rent regulations, this could be passed off as a legitimate cost of business increase, which allowed Fred Trump to raise his rents.

These were just the tangible benefits. Fred Trump had friendly bankers, and a reputation which could only mean that doors would open for his son that would be closed to almost anyone else. Donald Trump’s business was underwritten by his father, so people could lend and invest in his ventures with an understanding they would be very unlikely to lose their shirts. In the end, it was all backed up by the tangible assets of owning large chunks of land in central New York.

 

Typical

In this sense, then, Donald Trump is a very typical capitalist. He begins with a stockpile of accumulated wealth, his primary accumulation, which is usually received through inheritance, windfall, or through expropriation. The capitalists tend to be shy about this primary accumulation, since it belies their ideological claim that their wealth stems from their hard work, business acumen or risk-taking. In Donald Trump’s case, this primary accumulation is both his inheritance and his father’s capacity for raking in Federal subsidies.

This also shows that far from the fearless capitalist making his money away from, or despite, the activity of the state, in fact the process of creating capital is intimately tied up with state power and control. The Trump Empire depended on being able to get favourable consent from the city authorities. The army of lawyers were needed to use state mechanisms to enforce and protect the interests of the firm. Any regulation, such as rent controls, just became another lever to be manipulated in the single minded pursuit of gain for the family. Donald Trump’s presence in the White House is just a continuation of the practice to the world stage.

Any very wealthy person will engage in tax management and structure their inheritance effectively. What the New York Times’s investigation into the Trump empire shows, much like the Panama papers, is how trying to regulate the financial affairs of the wealthy is like trying to strangle porridge. The wealth of capitalists does not rest in mere things, but in the claim to things, and the power to exercise that claim. Such claims are entirely ethereal, existing only in the material practices of the lawyers and law enforcers who respond to them.

Donald Trump’s team have responded to the report by pointing out that all their activities were carried out under the advice of reputable tax managers and lawyers, and were all within the regulations at the time. They do not maintain that those practices were right, or good or noble, only that they were legal. As ever, it is one law for the poor, and as many laws for the rich as they want to buy.

Barstow, Craig and Buettner estimate that had Donald Trump simply invested the money he made from his father, he would have nearly £2 billion in wealth. It’s clear that Donald Trump is not a self-made man, his wealth comes to him not because he is ‘a very stable genius’, but because he has a powerful claim on other people’s work. As a bog standard capitalist, it is plain that he is not necessary to producing or adding to the wealth of the world. Though perhaps, by forcing his opponents to reveal this truth about capital, he may have done one worthwhile thing with his life.

PIK SMEET