As President Trump arrived in Davos for the World Economic Forum in January 2018, conventional wisdom had it that his presence was akin to the owner of a topless barbecue joint crashing a gathering of Talmudic scholars.
A year into his presidency, Trump had more than lived up to his “America First” mantra. He was attending an event premised on the importance of international cooperation—the theme of this year’s meeting was “Creating a Shared Future in a Fractured World”—though he derided multilateralism as the province of suckers. Trump denied climate change and mocked anything that he placed under the rubric of “political correctness,” from gender equality to racial justice—causes that the Davos crowd supposedly cared about passionately.
Yet the notion that Trump’s war on the global elite set him up for a hostile reception at the Forum mistook Davos Man’s animating priorities. Trump had arrived in the Alps having dramatically improved the part of the world that mattered most to billionaires—their bulging piles of money.
Little more than a month before flying to Davos, he had signed into law what he called a “big, beautiful” package of tax cuts worth $1.5 trillion. Artfully entitled the Tax Cuts and Jobs Act, it was heavy on the cuts and dubious on the rest, a fact evident to anyone paying even minimal attention to the orgy of lobbying that Davos Man had unleashed in pursuit.
The billionaires had walked away with much of the bounty in a deft bit of economic redistribution—from the bottom up.
The centerpiece of the package was a slashing of the corporate tax rate from 35 percent to 21 percent. Three-fourths of the benefits1 of that reduction would be vacuumed up by shareholders, with the wealthiest 1 percent of all households capturing the largest gains.
Middle-class people gained a taste of tax relief, but it disappeared after eight years, giving way to increases. A host of accounting gimmicks boosting the wealthiest people and corporations would last indefinitely.
By 2027, Americans earning between2 $40,000 and $50,000 per year would find themselves paying a collective $5.3 billion more in taxes, while people earning $1 million and more would still be savoring cuts reaching $5.8 billion.
“When you put all these pieces together3, what you’re left with is we are squandering a giant sum of money,” the late Edward D. Kleinbard, a former chief of staff at the Congressional Joint Committee on Taxation, told me. “It’s not aimed at growth. It is not aimed at the middle class. It is at every turn carefully engineered to deliver a kiss to the donor class.”
Never one to allow principle to stand in the way of an opportunity to ingratiate himself with power, Klaus Schwab lauded Trump for his signature accomplishment.
“On behalf of the business leaders here in the room, let me particularly congratulate you for the historic tax reform package passed last month,” Schwab said as he introduced Trump. He credited the tax cuts with “fostering job creation, as well as stimulating economic growth in the United States, and also providing a tremendous boost to the global economy.”
Schwab even issued Trump what sounded like a blanket exoneration for his astonishing breaches of decency—his racist attacks, his derision of women, his writing off much of Africa as “shithole countries.”
“I am aware that your strong leadership is open to misconceptions and biased interpretations,” Schwab told Trump. “Therefore, it is so essential for us in the room to listen directly to you.”
Trump’s embrace at Davos laid bare the sham at the heart of the Forum, the idea that it was dedicated to the noble concerns filling out its mission statement—“the global public interest,” “the highest standards of governance,” and “moral and intellectual integrity”—rather than the self-interested aspirations of the people paying the bills.
The Forum was a prop in the service of Davos Man as he pursued greater wealth and power. Everything else was artifice.
From his first day in office, Trump had distinguished himself as a man singularly hostile to the agenda that Schwab and his organization were supposedly pursuing.
He had yanked the United States out of the Paris climate agreement. He questioned the relevance of NATO, the military alliance that had prevailed in Europe since the end of World War II. Not least, Trump was readying a full-blown trade war, while issuing imperial edicts that American companies abandon China.
Trump was operating under the guidance of his chief trade adviser, Peter Navarro, an economist derided as a charlatan by many of his peers, yet celebrated in Trumpland as a truth-telling warrior. Navarro had coauthored a book called Death by China, which traded in the fatuous idea that American economic problems were the result of decisions made in Beijing, rather than Davos Man’s manipulation of Washington.
Trump was threatening to blow up the North American Free Trade Agreement. He was mulling whether to walk away from the World Trade Organization, the linchpin of the rules-based international trading system. In the Trumpian calculus, the institution was a gratuitous impediment to American muscle-flexing. As the world’s largest economy, the United States possessed the authority to dictate the rules in its own interest rather than submitting to the designs of globalist wonks in Geneva.
Trump had not been bluffing. He was serious about wrecking the postwar liberal order forged by Morgenthau and American allies in the previous century. If the rhetoric of the Forum had any meaning, Davos Man was supposed to be appalled by this historical turn, which made Trump’s arrival at the Forum a source of titillating anticipation.
Much of the corporate world was indeed uneasy about Trump’s tendency to call out multinational companies that had set up factories outside the United States—a clear play for support in places like Granite City. The trade war would prove debilitating to many American companies, menacing the very American manufacturing jobs it was supposed to preserve. The tariffs disrupted American factories by raising the cost of components and parts they brought in from China.
Trump would eventually impose tariffs on steel, even from stalwart allies like Europe, Canada, and Japan, while citing a justification that amounted to the nuclear option: He claimed the tariffs were necessary to address a threat to national security. In the age of America First, buying coils of metal from Ontario was akin to hiring ISIS to run security at Disney World.
Trump’s trade war would cause a downturn across American manufacturing. The steel tariffs were especially damaging. Major companies like Caterpillar, which made tractors and construction machinery, were slowing production as steel prices climbed4. In Michigan, factories that had resisted moving production to Mexico were suddenly contemplating that step as the steel tariffs increased their costs.
Trump was delivering on his mandate to attack China on behalf of working-class Americans. The results added injury to the people whose votes had proved crucial in putting him in office. Yet Trump remained popular in industrial communities, a testament to his genius in the one area of life in which he had inarguably succeeded—reality television. In his presidency, imagery outweighed policy.
More than seven times as many Americans worked at factories that made cars compared to those employed by steel mills. Trump’s steel tariffs were damaging the competitiveness of the former to gratify the latter. But Trump understood that—as television content—a small number of people resuming work was vastly more powerful than larger numbers of people keeping their own jobs. You could point a camera at the former; the latter was a footnote in a Commerce Department report. He flew out to Granite City, donned a hard hat, and mugged for the photographers alongside beaming steelworkers as the mill reopened. Their gratitude was the defining reality.
Davos Man hoped the trade war would prove a momentary bit of theater before Trump moved on to something else. Schwarzman was alarmed by the talk of “decoupling” from China, as if the two largest economies on earth were a pair of bickering spouses. Behind the scenes, he worked both sides, using his access to Trump and President Xi5 to try to ratchet down the tension and prevent an expensive rupture.
Fink also served as a go-between6 as he pursued Beijing’s blessing to operate the first foreign-owned mutual funds business in China.
Dimon fretted that a trade war was foolhardy. “There may be retaliation,”7 he told a television interviewer. “It kind of opens up a whole Pandora’s box of additional problems. It could escalate. It could hurt growth.”
Every time Trump threatened fresh trade action or claimed that trade wars were winnable, the stock market retreated in horror. Though Trump portrayed any product made in another country and sold in the United States as Americans getting ripped off, investors understood global supply chains. They could calculate the hit when factories in Michigan were separated from plants that made crucial parts in China. Some hoped Mnuchin would intercede and wean the president from Navarro’s wealth-destroying counsel. There were moments of ceasefire and, later, an interim deal, but major tariffs proved an unchanging feature of the Trump presidency.
This was the cost of the performance that Trump staged for blue-collar Americans—a satisfying if empty demonstration of American machismo.
Meanwhile, he gave Davos Man something solid and enduring.
He handed out money.
Like Bernard Arnault in France, Steve Schwarzman was intent on cashing in on the utility of having a Davos Man collaborator in high office.
Schwarzman dined frequently with Trump at his Florida estate, Mar-a-Lago, which sat near his own waterfront mansion. Though Schwarzman had not contributed to Trump’s 2016 campaign, he made up for it with a $250,000 gift to his inauguration8 committee.
Trump picked Schwarzman to chair a “Strategic and Policy Forum” that was supposed to advise him on economic matters. The panel also included Dimon and Fink. And as he filled out his administration, Trump surrounded himself with men (they were nearly all men) who gave Schwarzman a comfortable feeling, having dipped their beaks in the milk-and-honey of private equity.
The Commerce secretary, Wilbur Ross, had started his own private equity firm. The chairman of the Securities and Exchange Commission—the cops of finance—hailed from a Wall Street firm, Sullivan & Cromwell LLP, which touted its work for private equity as a core expertise. Trump entrusted the Treasury to Mnuchin, Schwarzman’s Park Avenue neighbor and fellow foreclosure enthusiast.
Right after Trump’s inauguration, Schwarzman threw another landmark birthday party, his seventieth. If the hullabaloo over his sixtieth had left him reluctant to further his reputation as the face of the New Gilded Age, this was not apparent from the extravaganza he unleashed at his Four Winds Estate in Florida. Two camels wandered the sands. A twelve-minute fireworks display exploded into the night. The pop star Gwen Stefani sang “Happy Birthday” before taking Schwarzman for a sashay across a dance floor inside a two-story tent, where acrobats leapt. The cake came sculpted in the shape of a Chinese temple complete with a dragon. This was what $9 million could buy9 a person intent on not letting their birthday pass without the appropriate revelry.
The guests included Trump’s daughter and son-in-law, Ivanka Trump and Jared Kushner. Mnuchin was there, too. Their presence underscored the role that Trump was expected to play in ensuring that Schwarzman’s eighth decade would be safe from any assaults on his storehouses of money.
Jamie Dimon was also eager to exploit the presence of a transaction-minded friend of plutocrats in the White House.
In addition to running America’s largest bank, Dimon was overseeing the Business Roundtable, an association of chief executive officers. He had assumed its chairmanship in January 2017, taking over an organization that had been a less than central player in Washington. Dimon was keen to boost the Roundtable’s influence by building consensus. He settled on an issue that everyone in the corporate ranks could quickly get behind: tax cuts.
He brought in Joshua Bolten, who had been White House chief of staff under George W. Bush, to serve as president of the organization. Bolten had actively campaigned against Trump, suggesting that a frequently bankrupt real estate magnate might not be the best fit for the Oval Office. But nothing makes people in Washington lose their memories faster than the smell of free money.
“That was then10, this is now,” Bolten said. “I’m excited about the opportunity generated by the Trump administration and Republican Congress for enactment of hugely beneficial pro-growth policies.”
Pro-growth was one of those magic terms in Washington, a thing that no one could oppose. Seasoned veterans of the federal process shamelessly used it to describe practically anything—agricultural subsidies enjoyed by a handful of megacorporations, trade protections that jacked up the cost of something real for millions of consumers (snow tires, lumber) to spare a handful of political donors from competition.
But the Trump tax cuts took the masquerade to another level. The Washington ritual of handing fresh billions to billionaires required that they be presented as a tonic for the ailing middle class. The Business Roundtable unleashed a television advertising campaign that was a tour de force of cynical manipulation.
“Millions of Americans drop out of the workforce,” a narrator intoned in an ad aired in August 2017 (when the unemployment rate sat below 5 percent). A camera panned across a packed line in an unemployment office, followed by a desolate business office, and then past a shuttered factory with broken windows before landing at the culprit in this exploration of decline: the headquarters of the Internal Revenue Service.
“America’s outdated tax system11 has produced slow economic growth,” the narrator continued. “Good jobs are disappearing.” The solution? “Tax reform.”
Reform was another beloved piece of Davos Man nomenclature, a means of making anything sound like progress, from eliminating retirement benefits to taking money from schoolteachers and giving it to Jamie Dimon.
Trump wrapped his tax cuts in the Cosmic Lie. Corporations would invest and hire. The wealthy would spend. The money would land in the pocketbooks of waitresses and car dealers and dry cleaners.
“Not only will this tax plan pay for itself12, but it will pay down debt,” Treasury Secretary Mnuchin said in urging congressional passage.
That declaration provoked near-universal derision. The University of Chicago surveyed13 thirty-eight prominent economists across the ideological spectrum. Only one pronounced faith that the cuts would produce substantial economic growth.
Pressed by Congress to substantiate his claim, Mnuchin’s Treasury produced a single-page memo that imagined fantastical rates of economic growth, yielding enough revenue to cover the cuts.
“We acknowledge that some economists predict different growth rates,” the statement read—Washington argot for “This will happen right after we extract oil from Saturn.”
Two years after the tax cuts14 took effect, corporate investment was lower than before. Rather than buying equipment and hiring people, companies used their windfall15 to purchase a record $1 trillion’s worth of their own shares over the course of 2018, enriching shareholders. They also paid out a record $1.3 trillion in dividends16 that year.
Wages rose less than 3 percent in the first year after the tax cut, even as the unemployment rate dropped. The budget deficit widened by more than a third, making a mockery of Mnuchin’s claim that the cuts would pay for themselves.
But the tax cuts worked perfectly as a perk for the people who mattered—Jamie Dimon and his fellow CEOs at the Business Roundtable. JPMorgan Chase reported record high earnings of $32.5 billion for 2018. In his annual letter to shareholders, Dimon acknowledged that $3.7 billion came via the reduction in corporate taxes.
Dimon took home $31 million in compensation for the year, while Wall Street paid out a collective $27.5 billion in bonuses—a sum more than triple the total earnings17 of every full-time, minimum wage worker in America.
Marc Benioff’s company lobbied directly for the drop in the corporate tax rate. Benioff would credit the tax cuts for a jolt in investment.
“The economy is ripping,”18 he would say later in 2018. “I can tell you emphatically that I’ve talked to, personally, hundreds and hundreds of CEO’s—not just in this country but all over the world—and all of them have consistently said that the reason they are investing more is because of the confidence they have from the tax breaks.”
The tax cuts would add to the American federal debt, already in excess of $20 trillion. Eventually, Republicans and conservative Democrats would take such numbers as the impetus for budget cutting, training their attention on programs for the most vulnerable people—Medicare and Medicaid, which delivered health care for older and low-income people, food stamps, housing aid, and cash grants for the poor.
Republicans liked to present themselves as guardians of the public purse, soberly acting out of fiscal propriety in contrast to Democrats, whom they accused of showering money on people who preferred welfare to jobs. Trump’s tax cuts revealed the hollowness of this pose.
Republicans sounded the alarm about deficits when the conversation centered on elements of no interest to the Davos Men who financed their campaigns. Public debt was presented as the reason that the United States could not possibly afford the same sort of national health care that was somehow manageable in nearly every other developed democracy. Yet there always seemed to be plenty to spend on tax cuts for billionaires.
Among the more earnest participants in Davos—high-minded members of nongovernmental organizations, human rights groups, and environmental advocates—Trump’s presence indeed registered as disturbing.
At a dinner he hosted annually on the sidelines of the Forum, George Soros, the financial trader and democracy advocate, warned that Trump was part of a wave of authoritarian rulers. “The survival of our entire civilization19 is at stake,” Soros said, citing “the rise of leaders like Kim Jong-un and Donald Trump.”
But within the community that spent the most, and threw the most lavish parties, Trump was the man who had just made the skies rain money.
The panel of CEOs Trump had convened to advise him at the beginning of his term, headed by Schwarzman, had been abruptly disbanded, after the president expressed sympathy for white supremacists and neo-Nazis who had marched in Charlottesville, Virginia. The business leaders could not countenance the optics of counseling a president who had described as “very fine people” the participants in a violent parade that had featured displays of swastikas and chants of “Jews will not replace us.”
The tax cuts had erased such unpleasantness from the memory banks.
“There are companies all around the world who are looking at the U.S. now and saying, ‘This is the place to be in the developed world,’” Schwarzman declared during a panel discussion. Privately, Schwarzman defended Trump from accusations of bigotry. “There’s not a racist bone in his body,” Schwarzman said frequently as he made the rounds at the Forum.
Trump threw a private dinner in Davos, inviting the chiefs of a dozen major European companies. He walked around the table, patting the executives on the back and urging them to invest in the United States, conducting himself like a one-man economic development authority.
The next day, he took his turn at the podium in the Congress Centre to deliver his keynote address.
Trump’s speech was brief, uncharacteristically mild, and even restrained. He tossed a peace offering to the internationalists, declaring that “America first does not mean America alone.” Mostly, he stumped for American business, cheerleading for foreign investment.
I later ran into Nobel Prize–winning American economist Joseph Stiglitz. He had been meeting with finance people.
“They are now licking their lips,” he told me. “Davos Man has been able to overlook Trump’s ‘America First’ rhetoric, his anti–climate change action, his protectionism, nativism, racism, bigotry, narcissism, misogyny, for the lucre that seems to be the true motivating force behind Davos Man.”
It would take the pandemic to reveal the full dimensions of Davos Man’s voracious appetite.