U.S. Presidential Elections: Which Party’s Leadership is More Favorable for Azerbaijan?

As the U.S. presidential elections approach, this topic is increasingly prominent in the global media. Following the July 21 announcement that Democratic Party nominee Joe Biden would withdraw from the 2024 U.S. presidential race[1] and endorse Vice President Kamala Harris[2], interest in the election has surged. Recently, Azerbaijani President Ilham Aliyev addressed questions regarding the upcoming U.S. presidential elections and Azerbaijan-U.S. relations during the Second Shusha Global Media Forum. Aliyev expressed a preference for Trump’s administration by stating[3], “First, there were no wars during President Trump’s tenure, which I believe deserves great respect and appreciation. Secondly, the position on traditional values, which is vital for the U.S. and the countries directly influenced by it, is also commendable. I believe the vast majority of the Azerbaijani people not only share this view but actively promote it in practice. If I delve deeper, everything becomes very clear. So, I will conclude my thoughts here."

This article discusses the philosophies and ideologies of the ruling parties in the U.S.—the Democrats[4] and the Republicans[5]—and their impacts on governance, as well as the implications for both the U.S. and global economies, including Azerbaijan.

Let’s first examine the distinguishing features of both parties. Historically, the Democratic Party has garnered strong support primarily from the urban poor dependent on welfare and government healthcare, minorities, particularly African Americans and Hispanics, mainly residing in the Northeast and Western states. Founded in 1828, members of the Democratic Party ideologically believe in liberalism, support government intervention in the economy to protect consumers, advocate for minority and immigrant rights, support abortion rights, and favor stricter gun control. Democrats place greater emphasis on equality and social/community responsibility. Current features of the Democratic Party include universal healthcare, criminal justice reform, opposing structural racism, reducing social inequality, supporting climate policies, strengthening democracy, and adopting softer immigration laws.

In contrast, Republicans have strong support in suburban areas and rural regions of the Midwest (Iowa) and the South (Alabama), where wealthy and white populations predominate, preferring lower taxes and limited government intervention in the economy. Corporate America and many farmers predominantly support the Republican Party. Since its inception in 1854, the Republican Party’s philosophy has been rooted in individual freedoms, rights, and responsibilities. They advocate for a laissez-faire economy, limited government, free-market capitalism, free trade, reduced taxes and government spending (fiscal conservatism), restrictions on labor unions, privatization, and the reduction of state welfare programs in favor of non-profit organizations. In foreign policy, Republicans typically favor increased military spending, strong national defense, and unilateral actions to protect national security interests. Particularly under Trump, they opposed globalization, illegal immigration, and the legalization of drugs. Unlike Democrats, Republicans oppose government climate policies and reforms like universal healthcare and education.

To evaluate the economic impacts of Democratic and Republican administrations in the U.S., factors such as GDP growth, inflation, particularly the prices of gasoline, bread, and eggs, as well as the number of new jobs created and real wages, are compared. Comparisons from 1947-2015 show that under Democratic administrations, the U.S. economy grew on average 1.6 times faster in real terms (adjusted for inflation) than under Republicans. In terms of job creation in the private sector, results indicate that during Democratic tenures, new jobs were created at a rate 2.5 times higher on average than under Republicans[6].

Regarding the Obama and Trump administrations, GDP growth in Obama’s last three years averaged 2.3%, while during Trump’s first three years, it averaged 2.5% annually. Before the pandemic, Trump’s administration created 6.4 million jobs in three years, while Obama’s last three years saw the creation of 7 million jobs. Real wages, adjusted for inflation, increased during Trump’s first three years, continuing the steady growth trend that began during Obama’s first term. Wage growth under Trump outpaced inflation, resulting in slight increases in workers' incomes.

Since President Biden took office, the GDP has cumulatively grown by 8.4% adjusted for inflation, compared to 6.8% under Trump’s leadership. Excluding the pandemic year 2020, Biden has a slight edge, with an annual GDP growth rate of approximately 2.9%, compared to Trump’s less than 2.7%. However, inflation has risen over 19% since Biden took office.

The average price of a gallon (3.8 litres) of petrol rose from $2.33 to $3.76 between January 2021 and May of 2024 year, according to the US Bureau of Labor Statistics. During this period, the cost of a loaf of bread increased from $1.55 to $1.97, while the price of a dozen eggs jumped from $1.47 to $2.70. By comparison, prices rose only 5% during a similar period under Trump. Although U.S. inflation sharply decreased from a peak of 9.1% in mid-2022, prices remain high, with the consumer price index at 3.3% in May 2024, well above the Federal Reserve's target of approximately 2%.

Biden and Trump can both claim to have presided over strong labour markets.Unemployment fell to a 53-year low of 3.4% in January 2023 and has remained below 4% for all but one month since then. Excluding 2020, Trump also presided over a period of low unemployment, with the rate falling to 3.5% at the end of 2019.

Under Biden, the economy created approximately 15.7 million jobs. In contrast, Trump left office with about 3 million fewer jobs created.

When it comes to wages, while both Biden and Trump oversaw strong nominal wage growth, U.S. workers report that their real earnings have decreased under Biden due to inflation. As of May 2024, despite a 0.5% increase in real wages compared to the previous year, real wages have not returned to the level they were at the start of Biden’s term[7].

There are clear boundaries between the ruling parties in the U.S., and changes in party representation have more substantial impacts on state policies than individual leadership changes. Therefore, this article aims to assess the current situation in the U.S. and the upcoming presidential elections' impacts on Azerbaijan, focusing on significant factors for the country's economic development such as oil revenues, hosting COP 29, human rights, and the peace agreement with Armenia.

First, let’s examine the economic impacts, particularly on the energy market. Republicans and Democrats have significant disagreements on energy policy. Republicans call for ending restrictions that distort the oil, natural gas, and coal markets, aiming to lower energy prices and maintain the U.S.'s dominant role in the energy market.

Republicans typically advocate policies that increase oil and natural gas supplies while reducing nuclear energy production. During Trump’s administration, they supported the repeal of many regulations restricting the operations of oil, gas, and coal companies, thus promoting the development of the fuel industry. In contrast, Democrats, led by Biden, who supports an ambitious climate agenda, continue to anger industry stakeholders by favoring policies that limit natural gas supplies in favor of renewable sources. Many Democrats prioritize renewable energy to replace fossil fuels and accelerate the transition to the future. The “Inflation Reduction Act” [8] signed by President Joe Biden in August 2022 includes billions of dollars in tax credits to promote green industries. However, despite this, U.S. oil production reached record levels during Biden’s administration, and the country now produces more natural gas than ever before. This trend is unlikely to continue as Democrats aim for an economy less dependent on fossil fuels. Therefore, Democrats promise to expand solar, wind, and geothermal projects and increase investment in clean energy research through the “Inflation Reduction Act” in 2024.

Donald Trump plans to implement incentives to increase domestic oil and gas production and reduce corporate taxes. If so, the world energy markets are likely to see a decrease in mineral fuel prices in the coming years, which could further reduce the revenues of Azerbaijan’s economy, heavily reliant on energy exports. In such a scenario, fiscal balance in Azerbaijan’s economy, which lacks new sources to replace oil and gas revenues, could be disrupted.

According to a Wood Mackenzie report[9] published in Bloomberg, Trump’s return to power jeopardizes $1 trillion in U.S. energy investments and future support for low-carbon energy sources. The report states that the Trump administration will likely propose policies reducing support for electric vehicles, renewable energy, and carbon capture technologies while promoting mineral fuel production.

On the other hand, Trump wants to be a president with a weak dollar but operates on a strong dollar platform. This is the prevailing view among Wall Street economists[10] dealing with figures related to Trump’s second-term plans. They believe tariffs imposed on U.S. trade partners, inflation, and interest rates could rise, boosting tax cuts and increasing the dollar’s value.

Thus, under Trump’s second term, lower prices of mineral fuels and a stronger dollar are expected in the energy market. Both factors could impact Azerbaijan’s economy, potentially reducing foreign currency revenues on one hand and causing the manat to lose more value against the strong dollar on the other.

Donald Trump's commitment to drastically reduce environmental costs and deregulate traditional energy sources' production and sale could result in a decline in U.S. investments in climate change mitigation and renewable energy. This could pose significant challenges for Azerbaijan's international advocacy efforts, especially as it gears up to host COP29 and strives to uphold its leadership in this area through COP30.

The U.S. administration's stance on key issues such as human rights and the peace agreement with Armenia is unlikely to undergo a conceptual shift, regardless of the party in power. If Donald Trump is re-elected, he is expected to continue prioritizing security and human rights in the South Caucasus as a key aspect of U.S. foreign policy.

[1] https://www.amerikaninsesi.org/a/7706942.html

[2] https://www.amerikaninsesi.org/a/7707546.html

[3] https://www.youtube.com/watch?v=ShwWN0li1zE

[4] https://democrats.org/who-we-are/about-the-democratic-party/

[5] https://gop.com/about-our-party/

[6] https://www.jec.senate.gov/public/_cache/files/309cc8e1-b971-45c6-ab52-29ffb1da9bf5/jec-fact-sheet---the-economy-under-democratic-vs.-republican-presidents-june-2016.pdf

[7] https://www.aljazeera.com/economy/2024/6/28/gdp-inflation-jobs-biden-and-trumps-economic-records-compared

[8] https://www.whitehouse.gov/cleanenergy/inflation-reduction-act-guidebook/

[9] https://www.bloomberg.com/news/articles/2024-05-16/a-trump-win-puts-1-trillion-in-us-energy-investments-at-risk?embedded-checkout=true

[10] https://www.bloomberg.com/news/articles/2024-07-25/usd-will-trump-s-push-for-a-weaker-dollar-work-wall-street-doubts-it?embedded-checkout=true