Crony Capitalism’s Rise in the US Market Under Trump
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There’s a large body of empirical evidence too show that countries with high levels of corruption also have weaker growth and share price returns,and also higher levels of economic and market volatility. So, what to make of the fact that crony capitalism is now becoming a feature of the US market?
From targeted regulatory enforcement to tariff carve-outs, contracts awarded to friends and family, and other forms of horse-trading going on between the Trump administration and countries and companies around the world, it’s hard to argue that American oligopoly isn’t on the rise.
The Intertwining of Politics and Business
the Saudi Crown Prince Mohammed bin Salman, for example, is engaging in sensitive national security conversations with President Donald Trump, even as the Trump family real estate business is in talks with the saudis about a big construction project. Trump’s artificial intelligence and crypto tsar, David Sacks, has hundreds of tech investments poised to benefit from policies Trump is pushing.
A big question is when, and how, all the ethical concerns get priced into US assets?
Five Vectors of Trumpian Transactionalism
A recent investor letter on the topic from the investment advisory firm JC Goodgal provided a useful framework for thinking about the different oligarchic vectors at play in America right now.It outlines five areas of Trumpian transactionalism,including government as investor (think intel),tariffs as a political tool,a more permissive crypto regime,unprecedented donor power and headline deals that announce favoured market players.
| Transactional vector | Description | Examples |
|---|---|---|
| Government as Investor | Direct government investment in specific companies. | Potential support for Intel and other strategic industries. |
| Tariffs as a political Tool | Using tariffs to exert political pressure or reward allies. | Trade negotiations and tariff adjustments with China and other countries. |
| Permissive Crypto Regime |