Chicago Booth Review Podcast Trump 2025 Versus Trump 2016

Hal Weitzman: Are the factors that propelled Donald Trump to power this time around broadly the same as those that helped him win in 2015? While the circumstances are different from a decade ago, the secular societal forces that drive support for Trump are also strikingly familiar.

Welcome to the Chicago Booth Review Podcast, where we bring you groundbreaking academic research in a clear and straightforward way. I’m Hal Weitzman. Today, as we prepare for another Trump inauguration, we’re digging into the CBR archives to revisit a conversation between Chicago Booth’s Luigi Zingales and Amir Sufi about the fundamentals behind Trump’s appeal.

The conversation was filmed in May 2016 as part of our Big Question video series, which brings together Booth faculty for an in-depth discussion. We wanted to bring it back because we were struck more by a sense of continuity than change.

For some observers, Trump’s reelection was all about economics, chiefly voters’ experience of inflation and their mistrust of globalization. To others, it reflects a general disenchantment with politicians and political institutions. Those are the same phenomena that Zingales and Sufi pinpoint. The discussion also touched on the rise of the far-right, which at the time was still on the margins of politics, but has since taken power in several large democracies.

I began with a question to Luigi Zingales.

Hal Weitzman: You pretty much predicted that Donald Trump might become a serious candidate for the US presidency. What was it that you saw then that others didn't see? I should say, that you said your editor of your book at the time told you to take it out, it was too preposterous.

Luigi Zingales: That's true. I think that it was very easy for me because I grew up in Italy and I've seen the deterioration of the Italian culture and the emergence of a character like Berlusconi.

Hal Weitzman: And just for those of you who don't know who Silvio Berlusconi or can't remember who Silvio Berlusconi was.

Luigi Zingales: Silvio Berlusconi was a real estate mogul who turned into a politician and basically created his own party and won the first election in 1994. In between '94 in 2013, he was Prime Minister for 11 years. So very influential and to this day, still some influence in the Italian politics.

And so the thing that is most remarkable is the similarity in term of background and ideas of the two characters. I have to say that Berlusconi is a little bit less anti-immigrant and sort of violent than Trump, but they both come from a business background. They both appeal to people who identify that being pro-market is the same as being pro-business, which is not true. And they both come from a part of the business world that is very monopolistic and corrupt, which is real estate. Real estate is corrupt in any place in the world. And so if you succeed in real estate, you probably are not the cleanest person on the face of earth. And I think that my understanding of why Berlusconi came about is because of the corruption of Italy. And the book that I wrote, A Capitalism for the People, is describing how they United States is looking more and more like Italy. And so it was natural to see the opportunity for somebody like Berlusconi to arise in the United States, and unfortunately it came.

Hal Weitzman: But most Americans will look at Italy and say, it's not corruption that's necessarily driving Trump, is it?

Luigi Zingales: Actually, I use a term that Lessig used, institutionalized corruption. Most of the politicians take a huge amount of money and drives their campaign and drives also what they push and what they don't push. And Trump with all its defects, people feel that he's independent because he's sort of running mostly with his own money, he's not dependent on anybody else. And I think there is a clear correspondence between the success of Trump on one end and Sanders on the other.

Hal Weitzman: But tell me, just to go back to this idea of institutionalized corruption, what exactly does that mean?

Luigi Zingales: It means that the economic power is shaping the rules of the game in a major way so that the game is rigged. When Bernie Sanders say the game is rigged, to some extent, he's right because the game is rigged by the lobby and the campaign donation and all the system that distorts the rules of competition in favor of large economic interests.

Hal Weitzman: We can talk about Sanders, but in the case of Trump, it's almost like he's both sides of the problem. He's both arguing against it and he's also participated in it.

Luigi Zingales: Absolutely, and that's exactly like Berlusconi, but some people who have not been educated to see the difference between the two, they're taken of the fact he's a businessman and he talks about vested interest, he must be good.

Hal Weitzman: Right. And just to pick up on one other quick thing you said, you draw this distinction which you've drawn a lot between pro-market and pro-business, just explain that for a second.

Luigi Zingales: Oh, it is very simple. Being pro-market means trying to get a system to work with the competitive marketplace and being pro-business means favoring business. And most of the time having a more competitive system does not favor the existing business people, while it does favor the business environment. So in term of creating a stable and clear business environment, the two ideas are the same. But when it comes to regulation, a lot of regulation is designed to prevent entry and that's really pro-incumbent businesses and anti-market.

Hal Weitzman: Okay, Amir Sufi, let me bring you in. You have a slightly different explanation of what's been going on based on your research about what happens when there's a big downturn in the economy and the political effects of that.

Amir Sufi: Yeah, so one of the things we find is a pretty systematic relationship that anytime you have a big financial crisis, which is usually associated with a collapse in real estate values, bringing it back to real estate, you have a group of haves and have-nots. In some sense, when house prices fall, someone has to take the loss. And what we basically argue is that, well, first the data just show that systematically, if you look over the last 60 years in a number of countries, you see an increased polarization that happens after these economic downturns. It usually actually breaks more to the far right in terms of the electorate. So people who consider themselves moderates kind of disappear from the population. It seems to be much harder to actually get a governing coalition to actually implement policies. So that's one of the big things that happens after almost every economic downturn, especially those that lead to financial crises.

And the logic of why is essentially when house prices drop, someone has to take the loss. And it oftentimes basically puts on this creditor/debtor relation that into a big disruption because creditors don't want to take losses, debtors don't want to take losses, the government is usually going to step in and favor one of the two, and it usually leaves a lot of people very alienated in a similar way to what Luigi is talking about, where they feel the game is rigged. And I think in the United States house prices dropped a tremendous amount, 40, 45% nationally, and it was very clear that the government basically went out and supported creditors to a very strong degree, in particular banks, whereas most homeowners were essentially left drowning under water on their mortgages. And so that has left a mark on the population that I think people are still very angry about and it does leads to more polarization.

Hal Weitzman: But to be clear, is that a mechanical effect? What is the actual effect? Because obviously we talk about Bernie Sanders, Bernie Sanders is very upset as are many people about the 1%, about banks being bailed out and not homeowners. So is it about anger or is it about something else? What actually explains...

Amir Sufi: No, I mean I think it's exactly what Luigi is saying as well in that there's a series of what we economists would call unexpected shocks, let's say house prices went down, let's say globalization happens, let's say financialization happens, we call them unexpected shocks but when you actually look at who bears the consequences of these shocks, it's almost always the same group of people. It usually tends to be middle and lower class Americans. And so to them it doesn't look like shocks, it looks like something systematic being put upon them to make their lives more difficult. And I think that narrative kind of plays out until people basically say the game's rigged. And we want politicians who are essentially outside the system who are going to disrupt that system. And it's even understandable to some degree, unfortunately, sometimes that turns into xenophobia, it turns into racism, it turns into violence at rallies and whatnot.

But I think it is an understandable reaction because to be honest, if you look at the data, it's pretty convincing that actually the people who are affected by globalization are people who worked in textile mills, people who made furniture, and they haven't been able to recover from the huge shock that happened when Chinese imports came in. Likewise, people who owned homes that all of a sudden found themselves underwater, never got any assistance. And so they're angry about that. And so they're more thinking that the game's rigged rather than, "Oh, these are just unexpected shocks that just happened to happen to me."

Hal Weitzman: I understand, but... Sorry, go on.

Luigi Zingales: Yeah, no, I agree with him that the crisis and collapse of the real estate markets, they were very important, but I feel was the straw, maybe a big straw, but that broke the camel's back, the problems were much more longer term. Now, my numbers might be a little bit old because still from my book, this was 2012, but if you look at the progression of the median male worker, for example, and not because female are not important, it's simply because in the female case there's been an improvement due to reduce inequality. But the person entering the workforce today, the median worker, male worker entering the workforce today makes less in real term than his father did. So many tension that always existed and will always exist are resolved by the fact that number one, people feel that they are feeling better. So a high tide lifts all boats. So did we have problems of tension, inequality, et cetera in the '60s? Absolutely. But when you have an economy that grows a lot, you don't care. Oh, look at now up to now in China-

Hal Weitzman: Well, we had a lot of social up people in the '60s.

Luigi Zingales: That's true, but not as radicalized in this moment, in my view, and not as a divide in the entire country. That was a small minority that was complaining and mostly in the United States about the Vietnam War, which is a completely different story. Today, we don't see those demonstrations because we don't have a draft, the draft, if we had the draft, the situation would be very different.

But look at China. China is creating enormous amount of inequality, but if you grow at 9% per year, everybody is lifted and they feel better. And the second, which I think here the crisis played a particular role, the second is that you are more willing to accept inequality if you think there is some sort of fairness in the role of the game. When you perceive and hear, I'm a hundred percent with him, that you bail out the banks, but you don't bail out the homeowner, even when this was completely possible, I think that people feel angry. And this anger took some time to organize. We saw the Occupy Wall Street movement, we saw the Tea Party and initially they were dismissed, but I think now they have progressed into Sanders on one end and Trump on the other.

Amir Sufi: I mean, one of the ways you can see the direct effect of these shocks on polarization, there was a recent study just released by David Autor at MIT, which I think is quite beautiful. It just shows he looks at congressional districts that were most adversely affected by the Chinese import shock, which is basically textiles, furniture makers basically. And he shows that if they're majority white, they go from having moderate Republicans to having very extreme right-wing Republicans. And if they're majority minority, they go from having basically moderate Democrats to having very left-leaning Democrats.

And so it's again, just this notion that what appeals to people when they're experiencing these shocks to their livelihoods, and I mean the research is really compelling that the people who actually live in these cities don't easily recover. They don't just go out and find another job or are able to move easily, for whatever reason, they sit in those towns and basically there's a lot of despair there. And you see exactly this phenomenon that the politicians they then associate with are the politicians that tend to be more extreme. And that's just, you can see that relationship quite directly when you look at the Chinese import shock. It's pretty stunning.

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Hal Weitzman: Do you think it's the downturn itself that leads to this kind of politics or is it the response to the downturn, the austerity, the bailouts and all the rest of it?

Amir Sufi: I mean, I think that if you look at... It'd be interesting to look at the Great Depression in more detail, and certainly there was a more polarized electorate after the Great Depression, but I think people felt like FDR was on their side. I mean, it was part of the whole fireside chats and the notion of explaining things. And that's kind of an exception to the rule, but I kind of agree with Luigi that you can have an underlying angst there, but when all of a sudden the pie becomes much smaller, then people are going to fight more viciously. And I think that's what you see not only in the United States, but in pretty systematic evidence across countries.

Hal Weitzman: So this was a tension that was kind of always there and was waiting to blow up?

Luigi Zingales: I think so.

Hal Weitzman: And the crisis, does that mean if growth comes back, then these tensions will dissipate and polarization will correct itself?

Luigi Zingales: If good growth comes back, yes. But the likelihood is that is not, unfortunately. I think that at least there is no sign that it comes with the weight of the '60s. And also there is an issue of distribution of growth. What I don't think we emphasize enough is if you look at the distribution of growth in the 2000s and it's gone disproportionately to the top 10%, and so how can the rest feel good? They don't.

Amir Sufi: And these things may be linked, right? I mean, it may very well be that we can't get good growth because we have terrible policies coming out of the government because of patronage politics, because of special interests. And I think that's the most worrisome thing I think in the United States, as Luigi's rightly pointed out in his book. I think the notion that special interests have become more powerful, that patronage politics is becoming the norm in the United States, I think almost all economists would agree that that would probably have a negative effect on growth. And I think that's what you're seeing is this interplay. So in some sense, people supporting Donald Trump, the people supporting Bernie Sanders, there is an element of truth in what they're complaining about and that is that the overall country is made worse if the leading politicians are reacting only to special interests when they make their decisions.

Hal Weitzman: Well, that's what I wonder about crony capitalism. One of the biggest effects in the US on crony capitalism was the Citizens United decision that allowed vast amounts of corporate money to flow into politics. We're seeing that in this cycle, and we'll see it in future cycles. I mean, that's something that's unrelated to economic growth. So what impact has that had?

Luigi Zingales: First of all, people dispute actually if Citizens United made such a huge difference in a sense that there was a huge amount in politics even before, and the trend has continued almost uninterrupted. I think that what has made a difference is mostly the concentration in donation in the electoral campaign. Now, most of the money does not come from individual donation, does not come from PACs, comes from Super PACs. And that's disproportionately true for the leading candidates with the exception of Sanders and Trump. And this is what is amazing. If we look at the distribution, the concentration of donation, there are two candidates that they refused donation. One is because he was able to raise a lot from small donation, the other because he does not raise a lot, and those are Sanders and Trump. And the other, there is a huge concentration and surprise surprise to the more populist candidate the other are not. So that proves that there must be some effect here and it is not random.

Hal Weitzman: Okay, But I mean if we look at the Congress, for example, congressional money, you've seen more and more corporate money flowing into congressional races, right?

Luigi Zingales: Oh, absolutely. But again, I'm not so sure-

Hal Weitzman: They're the people actually writing the legislation.

Luigi Zingales: No, no, absolutely. I'm not so sure how much... I'm not defending Citizens United, but I'm saying I'm not so sure that Citizens United made the technical changes that made the difference. Clearly, it is part of a trend in which this is not only okay, but also sanctioned by the Supreme Court and so made the norm much more acceptable. I think that there was period in which people were, believe it or not, embarrassed of getting a lot of money from a lot of concentrated donors. Today they're not, or at least until recently they were not. I think that now they started to try to hide it, but it became the norm. And let's remind us that our current president was the first one who ditched the public campaign financing for the presidential and took only private money for the presidential campaign, and this was in 2008. And he dwarfed McCain in fundraising and of course win the election and since then, nobody's even thinking about getting public funding for his campaign. So all these, this was pre-Citizens United, the president's against Citizen United. So it's not just Citizen United, it's much broader than that.

Hal Weitzman: Okay. Amir Sufi, You referred earlier to globalization. To what extent is this part of the pains of adjusting to globalization? This is mainly a phenomenon in developed countries where the kind of workers you were referring to are most harmed by globalization.

Amir Sufi: I mean, one of the things I think that I started to appreciate much more as an economist reading research is just how terrible insurance works. I mean, we have such good research now showing that people who lose their jobs and recessions end up seeing lower wages for the rest of their life. We have good research showing that people who graduate from college in the middle of a recession never are able to get as high a wages as the people who don't. These are all what we would call essentially idiosyncratic shocks to some degree that should be insurable and they're just not. And so what's going on really is that it just seems like people are really subject to these big shocks, and if they don't have at least some semblance of a way out, then they're going to get very frustrated. And especially if on top of that, they feel like the shocks are not really shocks but are being imposed upon them by the elite.

So that's why you see a lot of opposition to free trade. People say, "Oh, free trade only benefits the people at the top." If you're a worker in North Carolina that used to work in a textile mill, that's true actually, it is going to very much have a negative effect on you. And so I think that's what we're seeing in a lot of advanced economies is just we're seeing it play out. What happens when insurance doesn't work very well, insurance meaning I can be affected by these shocks that are going to have very long-lasting effects on me.

And I think what's more interesting, which I don't have as good a handle on, is why you then are more prone to supporting, say far right politicians who have xenophobic tendencies. It must be because in some sense you see these shocks as coming from outside, and so you start to blame people in the external environment. But oftentimes the shocks are being generated by people within the same country, but that look the same as you, they may just have a lot more money, but that seems to be the pattern that you see in both Europe and the United States.

Luigi Zingales: So I think first of all, he's absolutely right. And if I may add one thing, I think it's easier to demonize somebody, so you need to demonize somebody, and people are angry enough that they need somebody to be demonized. So that's I think is the mechanism. But I will add to what he said is that globalization, the early phase, was great for most of the West and with middle effects on the rest of the world, and now things are turning around. And globalization is definitely great for China, India, at least some part of China, India that can develop, etc. And remains great for one part of the American population, but it starts to hit a higher and higher level of income. So they're not just the textile manufacturer, now they're going to be soon the track drivers, this is not globalization, but technology, but the combination, the track driver that will be substituted out and will be the teacher today is relatively easy to actually get tutoring in India for a fraction of the price and pretty soon would be just the average lawyer or the average economist.

I think that we are going in what our late colleagues, Sherwin Rosen was calling a superstar economy in which if you are a superstar, it's great, if you're not, it's not. And we, economists are in general too cavalier, ignoring the redistribution aspect. We say we can get the insurance going, and so this is a good thing overall. Yes, it's a good thing overall, but if you don't get the insurance, for a lot of people, it's not a good thing and these people fortunately can vote and that creates... They start to squeak and say, "We want to change things."

Amir Sufi: I mean, in our models, these shocks happen to people, they go back to college or they move or whatever. In the real world, none of those things happen. People really are affected by these shocks. Sometimes they end up going on disability, that's a very common way people react to these negative job shocks. But in general, people are made worse off and we need a better understanding. They exactly why they don't behave as they do in our models, but they're just huge frictions in the real world. And I think you see it in all kinds of environments, the China trade shock being another one, financialization, technology, putting people out of work. And people don't just go back to college, they don't just go back to school. Maybe they do to some degree, but much less than we would predict. And so you have these very long-lasting effects, and that's something that we have to appreciate more, I think as economists.

Luigi Zingales: I think that we should also have our models behave more like we are people.

Hal Weitzman: That's a whole other question, which we'll come to in The Big Question another time. But I wanted to ask about, there appears to be a big narrative between the developed countries, the Europe and the US have both seen this polarization, in Europe, there've been a rise of the far right in several countries. Is that fair that this is the same narrative? Or are there really distinct factors in the US? You have the Tea Party and you have a more religious right, and in Europe you have a whole flood of immigrants coming from Syria and elsewhere.

Luigi Zingales: I think that-

Hal Weitzman: The Eurozone crisis.

Luigi Zingales: No, no, of course there are specificities says the migrant crisis in Europe is enormous, and the tension created by the Euro crisis are different. So we can't paint everybody with exactly the same brush. However, there is a common economic theme that maybe is less accentuated in Europe in term of inequality than the United States, but is common.

And then there is also a common political theme that very often is ignored. And the political theme is that since the '80s we have seen sort of the left losing the characteristic of the party of the people and becoming the Clinton Democrat that are basically in bed with business. And so for a while, this work wonderful when everything was growing, etc. And now what you have is you have people from the left that say, "Wait a minute, who represents us?" And it is also people from the right get upset of the fact that there is nobody representing the interest of the people at large. And so they created a mess.

We see that this is particularly strong in Europe, but it will be coming in the next election here too, is the disappearance of the social Democrat. This is amazing. In Austria, they were annihilated. In France, they will. In Greece, they had been annihilated. In England, they have thrown into old-fashioned socialists. So the social Democrats, the Blairite are disappearing and instead of it are either the hardcore left-winger, ala Corbyn or ala Bernie Sanders, or you have some form of populist from the right.

Hal Weitzman: Would you include Obama in that social Democrat?

Luigi Zingales: I think he's more nuanced, and I think he is less completely sold to business than the Clintons are. The Clintons are the prototype. Clinton and Blair are the prototype and Schröder in Germany. I think it's enough to look at where they went after they end their career. So Schröder got appointed chairman of Gazprom. It's a socialist move. And Blair is becoming an international star, paid like a Hollywood star and Clinton the same.

Hal Weitzman: I see. Amir Sufi, what about your views on the difference between Europe and the US?

Amir Sufi: No, I mean I think it's similar in a lot of ways on this debtor-creditor relation. I mean, I think that's where it's even more explicit in Europe than even the United States because in the United States, it at least is all within the same country, whereas in Europe, it's actually splitting on nationality lines, Greece versus Germany. And so that's one of the big things you see in Europe, that's not so explicit in the United States. In the United States, it's more complicated.

There's definitely a battle between debtors and creditors. You can think Occupy Wall Street is being very much the pro-debtors. You can think of Bernie Sanders talking about student debt, but it's not... In Europe, it's really like these northern countries and these peripheral countries and it's so explicit when you ask questions, how much do you think Greece should be allowed to renegotiate? Germans say, 70% say absolutely not. Whereas people in the peripheral say, "Oh yeah, of course we should be able to renegotiate the debt downward." So there that conflict is very pervasive and very sharp. Although I guess over time it's probably diminishing. The creditors have won in every way. So at some point, I guess the debtors either just get angry or just give up. But it's no longer a fight anymore. In some sense, it's already been won by one party.

Hal Weitzman: Okay, well I don't want to end on that. That's more depressing though. Let's be more upbeat. Luigi, what would be a good thing that the US could do or Europe could do in terms of public policy to attack crony capitalism?

Luigi Zingales: So I think that my hope for the United States is that the Trump experience will really force the Republican Party or a party of the center-right to regenerate itself, understand what it stands for. I think that it should have done it in 2008 and failed to do it, had a temporary victory at the cost of a Trump phenomenon later on. And of course, because there's always a dance in politics, this will force also the left to regenerate and says, probably this election will be won by Clinton. But I don't think that the Democratic Party will be the same that was under her husband and past Clinton, the left will be extremely dominant. So we're going to see a new political game in the United States, and-

Hal Weitzman: That really is optimistic. Hillary Clinton, who's the person you were just saying, was kind of the example of the corporate liberal.

Luigi Zingales: Yes, but it would be a temporary phenomenon and then-

Hal Weitzman: $275,000 speeches on Wall Street.

Luigi Zingales: Yes, but it's a temporary phenomenon, look past that.

Hal Weitzman: Okay. All right. Amir, what-

Amir Sufi: Look, I think Luigi's doing a great job of this. I think we talked about Jon Stewart. I think the reason for optimism in my view is that at some point the people get fed up with special interests and at some point it becomes something within the culture to actually call it out and really say, "Look, this is absolutely outrageous." Luigi growing up in Italy has seen it for a long time so he's already reached that point a long time ago. Though we Americans, like I grew up here, it's just us, we're starting to see it firsthand now. And I think that there has been a reaction, which is a good thing. It has to be managed carefully because I think sometimes some of the proposals that are made by people who, on behalf of the people can be really bad proposals, but at least having a culture in which it is looked down upon to take money from special interests and just serve their interests and that's it. That that's considered something that is antithetical to true public service.

That, once you get that embedded in the culture, hopefully you can start to get better outcomes at the political level. And in my view in the last 15 years and that partially describing... If you could have told me 10 years ago a guy like Bernie Sanders would have any success at all, I think he's having success precisely, whatever you believe about his policies is he's tapped into something that really, there is something wrong with a candidate like Hillary Clinton that even though if you may ultimately agree with some of her policies, but the fact that she takes so much money from bankers, the fact that she's associated with her husband who's taken so much money from finance, that there's something wrong with that.

Luigi Zingales: From a foreign country.

Amir Sufi: From a foreign country.

Luigi Zingales: The Clinton Country Foundation is financed by a foreign country. She was Secretary of State and she was going along with the Clinton Foundation on the side.

Amir Sufi: See, someone who's grown up in Italy can recognize it immediately and so soon we'll-

Luigi Zingales: That's my comparative advantage, yes.

Amir Sufi: At some point Americans will be able to recognize it easily as well.

Hal Weitzman: That's it for this episode of the Chicago Booth Review Podcast, part of the University of Chicago Podcast Network. For more research, analysis, and insights, visit our website at chicagobooth.edu/review. When you're there, sign up for our weekly newsletter, so you never miss the latest in business-focused academic research.

This episode was produced by Josh Stunkel. If you enjoyed it, please subscribe and please do leave us a five-star review. Until next time, I'm Hal Weitzman. Thanks for listening.