The catharsis of nostalgia?
By way of a post mortem
Nostalgia framed Donald Trump’s presidential electoral victory. It was both a means of diagnosis and a prognostic inspiration. Nostalgia fused the material and the affective, enabling the Trump campaign to successfully tap into the persistent economic pressures faced by a growing number of households across America, and mobilise the yearnings for bygone times.
The diagnostics and prognostics of nostalgia connect material measures with affective energies. In part it was about blame, matched with the promise that the nation could be reclaimed. The nostalgic imaginary harked back to a better time, before the ‘promise of America’ was polluted and stolen.
The economically displaced could sense their angsts being heard, and held out hope that the promises of America becoming a possibility once again. Their plight, and America’s plight, could be blamed on the dereliction of liberal elites who’d, through the generations, handed the keys of the promised land to a Godless “globalist” cabal. A revived American nationalism was Trump’s credo; he could make the call to both God and country.
America was reimagined as the victim par excellence. American generosity had been taken advantage of - by a cultural elite that had lost touch with the earthiness of America, by hordes of illegitimate foreigners, and by ungrateful nations around the world. Not only was America a victim of globalist abandonment from within its own ranks, it also was a victim of an unholy sabotage orchestrated by a Godless China that defied Washington, and an ungrateful Europe that refused to carry its weight and pay its way.
The nostalgic reflex conjured up an imaginary image of an unblemished, virtuous and strong America. It paints a picture of redemptive possibilities, in which those with a legitimate claim on the bounty of a redeemed nation are mobilised to channel their energies against the illegitimate. The stains of a fallen American could thus be washed away.
The Trump policy remit drew on conceptions of historic successes and a sense of original purity. The promise was a return to better times, to “make America great again”. Enemies were earmarked, and held responsible for America’s fall. The globalists had to be purged, the “swamp had to be drained”, and China’s mere existence constituted the embodiment of America’s decline. Having sought to shape and change China for decades, but failed, the register has shifted: China is America’s single greatest - perhaps the only - existential threat. As for the Europeans and other sundry allies, they had to simply pay up.
If nostalgia has political effectiveness, it’s unlikely to resolve America’s problems. That said, nostalgia may well be the prelude to the catharsis needed for America to find its way in the world as it is, rather than in the world of its imagination.
The American social settlement today
For the past 40 years, the real pretax income of the lowest 50% of income earners in America has been stagnant at best, and at times falling. Widening inequality at a macro level is symptomatic of structural changes to the American social settlement. These changes have not only exacerbated demographic inequalities, these have also played out geographically, as observed by US Department of Commerce research, and affirmed by a recent study in Nature and CEPR research on spatial wage differentials.
A range of data is strongly suggestive of a national economic model that is increasingly failing a large portion of Americans. Meanwhile, in the lead up to the election, so-called experts like Nobel Prize winner and leading Democrat Paul Krugman bemoaned the fact that many ordinary people did not appreciate how good the economy was doing. He put it down to “bad vibes”.
It was more than “bad vibes”, however. Consider the following:
Over 50% of Americans live pay-check to pay-check. Bank of America data, from October 2024, shows that more Americans today than five years ago are stumbling from one pay cycle to another. According to the report author, David Tinsley, "For some households, the rises in their incomes will have largely kept up with inflation, shielding them.” Unsurprisingly, lower-income households have borne the brunt of the impact, with 35% of those making less than $50,000 annually falling into that category, but every income bracket showed at least 20% have little left over after necessary spending, including those making more than $150,000.
Over 20% of American households report that they skip meals to afford rent or housing loan repayments, according to a Newsweek report in April 2024. According to the Federal Department of Agriculture 13.5% of households experienced food insecurity in 2023, up from 12.8% in 2022.
Inflation was affecting lower income households disproportionately, as asset-rich households could not only absorb the price increases but also benefited from rising asset values in property and stocks. Rising interest rates - ostensibly to bring inflation to heel - actually makes matters worse. This was demonstrated by former Secretary of Treasury Lawrence Summers and his co-authors, in a February 2024 working paper. In it, they argued that existing price index measures do not include the cost money, and that once borrowing costs were included, the effective costs borne by households was considerably higher than what mainstream models would have predicted.
Credit card debts are on the rise, as are delinquency rates. A growing number of households are struggling to meet ever-growing interest obligations let alone tackle the principal. National household saving rates have plummeted from pandemic highs, as households have been forced to use up savings to get by. According to reports from the Federal Reserve Bank of New York, credit card delinquencies have grown more than 50% in the past year. All in all, approximately 6.4% of all accounts are now 90 days past due, an increase from 4% at the end of 2022. American households have been eating up savings to cover rising costs of living. The household saving rate in the US is now at 4.8% (August 2024), having averaged 8.44% between 1959 and 2024. Indeed, they had reached a record high of 32% in April 2020 at the outset of the pandemic.
The cost of housing in swing states has been rising quicker than the national average. The same has been the case for the cost of living generally. On average, according to data in USA Today, the median home values across the US rose $106,000 in the past 4 years but rose by more than $128,000 in Wisconsin, $138,000 in Georgia, $141,000 in Nevada, $145,550 in North Carolina and $162,000 in Arizona - all swing states. In five of seven states, in price-to-median income terms, it’s more expensive to own a home now than it was four years ago.
Swing states also experienced median household income growth levels below the national median. Reports noted that in Georgia and Pennsylvania, the decrease in median household income between 2022 and 2023 was statistically significant, with census researchers noting that Georgia and Arizona both experiencing above-average increases in rents.
While many Americans experienced stagnant real wages or were going backwards in the face of inflation, a minority benefited from capital growth as asset prices in property and stocks continued to rise. According to Fed data, about 93% of stock market capitalisation value is held by 10% of Americans, while 1% was held by the bottom 50% of wage earners. A buoyant S&P 500 does not equate to a robust economy for ordinary households.
Life expectancy has been falling in recent years - the first time in more than two decades. At the same time, infant mortality is rising. These outcomes are notionally paradoxical when set against the fact that health care expenditure contributes about 16% of American GDP - almost double the global average of around 10%. Yet, this too is symptomatic of a financialised economic system as health care is monetised to generate financial profits rather than deliver health outcomes per se.
The folly of nostalgia
The symptoms of the breakdown of the social settlement are increasingly hard to avoid, let alone deny. Only mainstream economists like Paul Krugman seem to conjure ways of ignoring this salutary reality.
There were better times, and the politics of nostalgia taps today’s material conditions to mobilise a sense of collective possibility. It does so through the Schmittian frame of politics: defining the friends and the enemies. Trump’s brand of American nationalism sets its sights on two enemies: a domestic foe, embodied by the liberal establishment and an international threat, namely China.
Domestically, he rallied against “the swamp”, which had hijacked the promise of America. A bloated and self-absorbed political and cultural elite had stifled the American dream, selling it to the highest bidder. An attack on cultural liberalism animated a Christian base, long worried by the pollution and dilution of America’s spiritual core, and served to agglutinate disparate political energies against a common foe.
Externally, Trump’s first term set its sights on China. China was held responsible for the hollowing out of American industry, through its ‘theft of jobs and intellectual property’. That China was to blame for America’s industrial plight remains the dominant leitmotif of Trump’s economics. Trump’s vice presidential running mate, JD Vance, argued that, “Together we will protect the wages of American workers and stop the Chinese Communist Party from building their middle class on the backs of American citizens”. America was, again, the victim of evil-doers. Scores needed to be settled, the most obvious of which was the calculus of the trade balance.
Trump saw tariffs as the pivotal means by which he could bring China to heel. Through tariffs on Chinese-made goods, the belief was that it would bring the jobs back to the heartland. Post-pandemic the rhetorical heat was turned up further, as the competing forces in America’s political establishment sought to out-do each other when it came to ‘getting tough’ on China. China was not just a miscreant, a thief, but a threat to the very existence of the United States and the American order of things. Decoupling became rhetorical de rigeur, even as it became difficult to achieve in reality.
Trump’s tariffs didn’t bring back the jobs. So much is clear from a January 2024 study undertaken by American economist David Artor and his colleagues. Artor has long studied the impact of trade and technological change on the composition of American employment. His academic work could not be described as a blind adherence to the classical doctrines of free trade, but his analysis of Trump’s tariffs showed that the tariffs simply did not fulfil their stated aims. At best, the jobs did not come back to the heartland; at worse, via indirect effects, the tariffs further hurt the employment prospects of those least well placed to adapt. The tariffs were an economic failure, but delivered an electoral bonus in 2020.
Never one to back down in the face of failure, Trump speaks of doubling down on tariffs. As such, tariffs continue to feature as the dominant policy trope for Trump 2.0. He has threatened tariffs of anywhere from 60% to 200% on Chinese-made goods, and tariffs on goods from other countries. He even threatens the use of tariffs against countries that move away from the US dollar as global reserve. With characteristic hyperbole, he went so far as to claim: "If I'm going to be president of this country, I'm going to put a 100, 200, 2,000 percent tariff”.
If tariffs didn’t work in the period after 2018, there’s good reason to be dubious about the extent to which they will be successful in the future. The hollowing out of American manufacturing employment over the past 40 or so years has been a function less of trade from other countries, but from a progressive financialisation of the American political economy and the substitution effects of automation. Let’s not forget that as manufacturing employment fell, manufacturing output continued to grow. Furthermore, China’s economic structure - particularly in manufacturing - is less dependent on US markets, and exports generally, today than it has ever been.
American Industrial Hollowing Out
Researchers such as Imad Moosa, Maria Ivanova, Braun and Milberg and Wilker amongst many others have shown how growth in financialisation since the 1970s adversely impacts capital accumulation in American industry. They show that the growth of the former is the direct corollary of the hollowing out of the latter. Using the IMF’s index of “financial development”, Moosa demonstrates the inverse relationship between the expansion of financialisation and the contraction of employment in American manufacturing. Indeed, concerns about the decline of American manufacturing go back to the early 1980s, when analysts such as Ira Magaziner warned of declining productivity and competitiveness. This predates the growth of Chinese industrial capability by two decades.
Financialisation coincided with the decline in manufacturing employment - the source of much of the political complaints driving the political cycle. It also enabled a massive concentration of financial wealth and economic power, as noted earlier. Aside from the concentration in stock value ownership referred to above, according to a recent Oxfam report, the top 1% of American corporations own 97% of corporate assets in the U.S. Economists Kwon, Ma and Zimmerman have shown the long-run tendency for the concentration of American capital across all industries, with manufacturing concentration dynamics taking place most obviously in the 1970s.
Financialisation and concentration of ownership and market concentration have all been pivotal to the structural transformation of the American political economy. Trade impacts were, arguably, after effects. Yet, we see trade policy take centre stage in American foreign economic policy, which simply does not address the chronic structural imbalances of the financialised American economy. Trade policy, anchored by protective measures, finds traction not because of economic efficacy but because of their emotive effects. This political dividend is mobilised through the politics of nostalgia.
China’s Resilience
As for China, according to World Bank data, its GDP growth is predominantly driven by domestic demand as opposed to net exports. China’s trade balance as percentage of GDP has averaged 1.52% for the period 1960 to 2023, with the range being -4.04% to 8.68%. It was 2.17% for 2023. As for China’s manufacturing, it is nowhere near as export dependent as many assume. Recent analysis by Rick Baldwin, Professor of International Economics at the IMB Business School in Lausanne, shows that its exports to output ratio of 15% is close to levels evident in the mid-1990s (13%), having peaked at 18% in 2004. Exports have continued to grow globally, and the US market’s share of Chinese manufactured exports continues to decline.
The relationship does have asymmetric elements, however. While in proportionate terms manufactured output is not highly trade dependent, parts of the US economic model is now substantially dependent on Chinese manufactured inputs overall, as Baldwin notes. This is the case for capital goods and intermediate goods, meaning that any effort to expand American manufacturing output presupposes increased importation of Chinese made capital and intermediate goods for some time yet. Incidentally, a recent report by Pentagon consultants Govini shows the US defence sector to be dependent on tens of thousands of Chinese suppliers.
Should additional tariffs be imposed in a new Trump administration, hampering access to the American market, the question is the extent to which countries (and their industries) can adapt to this loss. A recent research note (November 5, 2024) by Simon Evenett, seeks to estimate how quickly different nations could respond. He assumes that the US market is entirely closed to imports from the beginning of 2025. He then estimates, for 144 American trading partners, in which year the growth in non-US imports will fully compensate for the loss of US market access. Evenett concludes that Australia’s exports would recover the fastest, followed by China which would fully recover by 2027. The impact on China’s industry would be ephemeral, reinforcing the existing pattern of trade growth with the developing economies of the world.
The secular evolution of global trading patterns towards the high growth markets of South East Asia and Africa, anchored by the expansion of the Belt and Road Initiative from China’s point of view, has made the US market far less important than it may well have been in times past. Nostalgia may convey a sense of former greatness, but the realities of present-day trading patterns point to a different state of play. Tariffs and other measures aimed at creating barriers to access to the American market are unlikely to impact China that much or for that long. The experience of the Trump tariffs since 2018, and China’s ongoing restructuring of domestic production and trade patterns over the past decade or more, are strongly suggestive that while there are always disruptions and costs, it’s unlikely that the approach will lead to a revitalisation of American industry or a dampening of China’s industrial development trajectory.
In all likelihood, the US economy will suffer more from higher costs and loss of access to critical materials, intermediate goods and final consumer goods. The jobs won’t come back to the heartland.
A prelude to a catharsis?
Politics is affective; the affective is material. The material realities of a financialised political economy underpins a social settlement in which a growing proportion of Americans is worse off today than they were in the past. Against these realities, passions are provoked, curated, coalesced and harnessed. Nostalgia provides the focus of these passions. The nostalgic turn invokes a sense of the ‘good old days’. Nostalgia works because it is a void that is readily filled by disparate imaginations.
Nostalgic mythologies invoke a yearning for a bygone time. They also provoke strong nationalist and at times racist sentiments as pointed out by researchers like Nancy Foner and sociologists Elgenius and Rydgren. They observe that the politics of nostalgia has a distinct set of mechanisms “involving the juxtaposition and unfavourable comparison between an idealised glorious past, a decaying present, and the creation of a utopian future, that in many ways resemble Christian narratives of fall and redemption.” Unsurprisingly, these mechanisms and features are prevalent in contemporary American political discourse.
Decades of material decline, interwoven with a palpable fear that the cherished civilisational promise of America is coming asunder in the face of enemies from within and without, often but not always channelled through the proclivities of spiritual warfare, saw Donald Trump and the Republicans exact revenge on a system that they claim stole the election in 2020.
Nostalgia anchored this vector of energies and visceral desires - a desire to reclaim America’s lost promise; to be energised by the memory of once ‘great’ times; and to be girded by the surety that comes from knowing that one is a vassal for the commands of God. While nostalgia is an affective imaginary, mobilising the imaginations of those yearning for better times, it works on the material experiences to liberate an energy of hatred - of those that are to be held responsible for one’s personal plights and the nation’s fall from grace - and of hope, that the lost promise can be rediscovered as the enemies are vanquished.
The importance of American nostalgia and its political effects carry risks to global security and stability, as a public policy anchored by a nostalgic reflex does little to address U.S. malaise through the much harder lens of economic structure and concentration of wealth. Deflection is a portend for ongoing tensions in the domestic body politic, with blame shifting intensity likely to rise as problems get worse. Playing the victim card plays well to a domestic audience intoxicated on patriotism and acts as a clarion call to all those who believe that the American Dream is now a living Nightmare.
American protective trade policy, a la Biden and Trump-Vance, is no substitute for domestic structural rebalancing. This means tackling the outsized power of finance capital, amongst other things. Prevalent domestic structural imbalances are driving a foreign-cum-trade policy that appeals to the affective dynamics of electoral cycles but which mask the root causes of American malaise with spillover effects on global security, stability and prosperity. Perhaps, if there is a silver lining for America, it is that this nostalgic turn will in time catalyse a catharsis for the declining American political settlement.