The victory of Joe Biden over Donald Trump in the US general election is a “double repudiation” not just of Trump but of the “democracy in crisis crowd” who thought American democracy was under threat, argues historian and author Stephen Kotkin, the John P. Birkelund ’52 professor in history and international affairs at Princeton University.

The US system was not designed for good-hearted politicians, but to check the power of venal politicians and force consensus and coalition to get anything done, Kotkin said, speaking at the Investment Magazine Fiduciary Investors Symposium held online on November 17 and 18.

“The US system worked and the institutions are strong,” Kotkin said. “The genius of our system is that even with bad people we can sometimes get good results.” you can watch a short excerpt of the Kotkin interview below.

Kotkin said the last time an incumbent president was beaten by a challenger with such a large percentage of the popular vote was when Franklin Roosevelt toppled Herbert Hoover in 1932.

Biden won because women in the suburbs swung massively in his direction, not because he increased his vote with traditional Democratic constituencies.

The result was also a backlash against racialism, he said, with Americans increasingly mixed and in inter-racial marriages and no longer identifying racially the same way they used to.

“Trump’s vote among black people increased this time since the last time, 2016,” Kotkin said. “We know that 25 per cent or so of Americans are liberal, and 28 29 [sic] per cent are conservative, and 40 per cent are moderates. That’s the electorate and they repudiated the extremes. And give them credit, there was a kind of genius in that.”

With Biden having presented himself as someone who can unify both sides of politics, voters have “called Joe Biden’s bluff” by electing him with what is likely to be a Republican senate, although this won’t be confirmed until January, Kotkin said.

But deep divisions remain in American society and Biden will need to focus on possible areas of bipartisan consensus.

This could include providing broadband access to rural communities which are the base of the Republican Party, better funding community colleges and vocational education which educate more people than universities, and going after monopolies which dominate the economy and hinder new entrants.

“A deal can be made,” Kotkin said. “It requires Biden to govern from the centre and it requires Republicans to be cooperative, not obstructive. It remains to be seen, but I’m optimistic the option is there if both sides want to exercise it.”

Biden will also need to show he can build a working relationship with majority Senate leader Mitch McConnell, build a better working relationship with China, and manage the passions of the leftist wing of the Democratic Party, Kotkin said.

After discussing issues such as the poor representation of the broader American society in government, the Black Lives Matter movement, conservative influence over the Supreme Court and Cancel Culture, Kotkin moved to the chair seat and conducted an interview with Peking University professor of finance Michael Pettis (pictured below) on the topic of global trade wars and tension with China.

Kotkin asked Pettis broadly to explain why the Chinese government had been unable to achieve some of the economic goals it has set for itself. Pettis said China was facing the same challenge faced by other fast developing countries before it: how to transition its economy from one led by investment to one led by consumption.

But this is politically hard to do, he said.

“In the first place you have a growth model that benefited certain sectors of the economy disproportionately, that is local elites, local governments etc,” Pettis said. “Since then, they have become very, very powerful and when you try to shift an economy in which they are no longer disproportionately benefiting from the growth model but rather are paying a disproportionate share of the cost of future growth, then of course you are going to get a lot of resistance.”

Changing the distribution of income towards households would also shift the distribution of power, Pettis said.

“You have to raise consumption from roughly 50 per cent of GDP to roughly 65 to 70 per cent of GDP at a minimum,” Pettis said. “So households go from being roughly equal to the rest of the economy to perhaps three times the size of the rest of the economy. I would argue you can’t really do that without a significant change in political institutions and in the structure of political power in the country. That’s why it’s always been so difficult to pull this off.”

But he said he did not believe China would have a financial crisis despite the messy balance sheets of its banks.

“When you look at Chinese balance sheets they look terribly mismatched, but as long as the banking system is essentially closed and the regulators are highly productive, then they can restructure liabilities at will.”

You can see the full interview with Stephen Kotkin and Michael Pettis on the Fiduciary Investors Symposium digital hub.

Ben Hurley is a journalist and editor with more than a decade of experience in the industry. He has written for The Australian Financial Review, Business Review Weekly, The Guardian and a range of specialised and industry publications.
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