The curious thing is, while the folks who still identify as members of the industrial economy obviously consider themselves part of capitalism, it is actually knowledge workers who are a new kind of capitalist. It is not the companies who manipulate things that account for the rise in stock prices; it is the companies who manipulate symbols. Not General Motors but Microsoft, not US Steel but Google are now the world's most valuable companies.
In 1989, working class whites and white college graduates had about the same share of the country's net worth: 45 and 46 percent.
By 2016, that had dramatically changed; the share held by the white working class had dropped to 22 percent and the share held by white college graduates was at 67 percent. (See figures 4 and 5.) The two groups had gone from equals to a 3 to 1 difference.
The post-FDR Democratic Party had shifted from the party of farmers to the party of labor. Post-JFK, they had increasingly been aligned with a particular kind of labor, with knowledge workers who have college degrees. In a recent Quinnipiac poll, there was a stark contrast between whites with and without college degrees. Trump led by 3 points among the white working class and trailed Biden by 33 points among white college graduates. White college graduates aren't exactly socialists; they actually are the ones with an increasing share of capital.
Trump warns of market collapse and for the white working class, that actually resonates. The truth is, though, that the stock market first made significant by Republican policy in the 1800s now seems to do best when a Democrat is president. (I'd be remiss if I didn't point out that people like Daryl - who are smarter than me - point out that seeing a correlation between who is president and how the market does is akin to seeing a face in piece of toast; there are simply too many variables at play to claim such a simplistic link, they say.) One big reason markets do better under Democrats is because the are more likely to push for Keynesian policies that accelerate recoveries and mitigate busts. A more subtle reason is that Democrats are the ones whose pro-education and research policies are more obviously assisting the information economy dependent on knowledge workers. One can argue that stock market performance is too complex to trace to something as simple as who is president and that market movement has little to do with that. That is certainly the rational thing to argue. I argue instead that at different points in economic development, different policies are better aligned with current and emerging realities. The important reality of the 20th century is that labor led progress in the same way that capital led progress in the 19th century. The party advocating for labor was the Democratic Party and so the market did better under their leadership.
The stock market has done well under Trump. The average of S&P 500, NASDAQ and the Dow in his 3.5 years in office have gone up 57%, so better than it had at this point under Carter, about the same as under Clinton and not as well as under Obama. Since Carter, though, the differences through the first 3.5 years of the presidency have been 2 to 1 in favor of Democrats. On average for Democratic presidencies 3.5 years in, the market was up 53% and the average for Republican presidencies was up 26%.
The differences in market returns since 1900 have been stark. Imagine two families, each with $100,000 at the start of Teddy Roosevelt's presidency in 1901. One puts all their money under a mattress each time a Democrat is in the Oval Office and puts it all in a Dow index fund each time a Republican is in office. The other family does the opposite, going all in on the Dow each time a Democrat is in office and under the mattress when a Republican is president. How would the two families have done since 1901? The Republican family would now have $700k. The Democratic family would have $5.9 million.
I argue that the stock market has done better under Democratic presidents because financial capital now follows the development of intellectual capital and Democratic policies are more obviously pro-labor with its consequent intellectual capital. Smarter people than me look at this same data and say that this link between presidencies and stock market performance is random. Folks on talk radio look at this data and argue that it is clear evidence that Democrats are socialists and the market does better under Republicans. That last claim - that in spite of the data markets actually do better under Republicans - seems the hardest to believe.
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