Economy & Business

Trump’s Economics of Exhortation

(Al Drago/Reuters)
He specializes in wheeling and dealing rather than creation and commerce.

A  strain of American politics has always longed for the government to be run like a business, and thus for a president to come from the private sector. Republicans chose corporate executive Wendell Willkie for their presidential nominee in 1940, and the populist entrepreneur H. Ross Perot attracted more than 18 percent of the vote for his independent bid in 1992. Carly Fiorina of Hewlett-Packard fame (or infamy) ran for the Senate and then president.

In 2016, we got our businessman. His trade war, which officially commenced July 5 with $34 billion in tariffs against China, suggests we got him from the wrong business — one based on wheeling and dealing rather than creation and commerce.

To be sure, the desire for a fusion between business and political practice has always been folly. Politics is not a business, and we should not wish it to be so. Businesses are characterized by concentration of power, constitutional government by the separation of it. Businesses properly pursue profit single-mindedly; governments must seek multiple ends and balance many constituencies.

But if the idea of an entrepreneur president holds any appeal, it ought to be that he or she should understand the conditions of wealth creation and therefore economic growth. President Trump’s trade war raises questions about whether he grasps even the nature of wealth, much less the conditions that encourage its production. Wealth is the product of the creation and exchange of things of value that did not exist before. These are activities a free economy encourages by rewarding them with profit.

President Trump’s indifference to wealth creation is unsurprising for a creature of the real-estate sector, especially the New York City variant of it: It’s a business in which deals are negotiated, properties are swapped, and the lines between the public and private blur.

That is not to say the Trump Organization does not create value: The swapping of buildings often entails improving them. Value, moreover, is subjective. The economic worth of a book consists not in the physical materials of which it is made but rather in its audience’s willingness to pay for the stories or ideas on the page.

But the very fact that Mr. Trump’s chief business acumen lays in his supposed brilliance at negotiation suggests he is less skilled in creating wealth than in moving it around. Negotiation is a vital economic function, to be sure, but it is not a whole foundation for economic growth. It is significant both that much of his purported personal fortune consists of the asserted value of his name, which is a mirage, and that he announced his candidacy with the bromide “We need a leader who wrote The Art of the Deal.”

But the art of the deal is different from the art of wealth creation. Enter the president’s trade war, which is rooted not in the creation of wealth but rather in the economics of exhortation. The premise of free trade is that it benefits consumers — a class of individuals curiously exempt from Trumponomics — and thus creates jobs by encouraging the efficient production and exchange of new, better and cheaper goods. Trump, by contrast, is interested in cutting deals and issuing demands.

Two problems result. One is that foreign consumers cannot be compelled or exhorted to buy American goods. They can be induced to do so only by the value American products and services provide, which is and ought to be a function of dispersed enterprise rather than centralized politics. To wish otherwise is to aspire to a concentration of power that neither economics nor constitutionalism can bear.

Would that he appreciated how free economies, and free constitutions, actually run.

Thus the second problem: Mr. Trump echoes the New York City real-estate market of his youth, a place of backroom deals and sordid politics, by blurring the lines between the public and private spheres. When Harley Davidson rationally announced it would move some manufacturing overseas to avoid the tariff war Mr. Trump triggered, the president’s response was not to ask what conditions would encourage domestic manufacturing but rather excoriation and an apparent attempt at intimidation.

There are other indications of Mr. Trump’s attitude toward markets. He thought he could keep jobs at the heating and air-conditioning manufacturer Carrier in Indiana by means of artisanal deal-making. (This was supposed to be a shakedown of a private business by a political figure — itself problematic — but the fact that Carrier extracted concessions and then shipped jobs off anyway raises the question of who shook down whom.) His then-spokesman ventured that a 20 percent tax on $50 billion of Mexican imports would raise $10 billion for a border wall, as though taxing an activity had no effect on its extent. Mr. Trump attempted to compel by empty demand the use of American steel in domestic pipelines.

Yet it is not within the competence or constitutional capacity of presidents to direct the location of manufacturing or the allocation of capital. And to say that Mr. Trump is uniquely capable of this because of his checkered background in business, even if it were true, would be to authorize a less economically gifted president to do so as well.

These are two concepts — the creation of wealth and the limitation of power — that seem to elude our businessman president. Would that he better appreciated how free economies, and free constitutions, actually run.

NOW WATCH: ‘Trump Tells May To Finish Brexit So The US And UK Can Make A Trade Deal’

Greg Weiner is a political scientist at Assumption College and the author of Madison’s Metronome: The Constitution, Majority Rule and the Tempo of American Politics.

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