Donald Trump's economic amber
America already has a horribly muddled industrial policy. Trump is about to make it even worse.
What if industrial policy — a national strategy to promote certain industries or sectors of the economy — never went away? What if it can't go away? And what if Donald Trump is about to make it much, much worse?
Trump and Mike Pence recently cut a deal to save several hundred jobs that Carrier, a manufacturer of air conditioners and gas furnaces, had planned to relocate from Pence's home state of Indiana to Mexico. It was a minor public-relations coup, to be sure, but questionable on the merits. On this, economists on the left and right largely agreed, if for different reasons.
Center-left economists like Larry Summers, the former treasury secretary, warned that the nature of the deal portends a transition from "rule of law capitalism" to the "ad hoc deal-based capitalism" of authoritarian regimes like China. Sen. Bernie Sanders (I-Vt.) wrote: "Trump has endangered the jobs of workers who were previously safe in the United States. Why? Because he has signaled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives." (Trump has since threatened to impose a retributive 35-percent tariff on companies that move abroad, but he offered no details, he can't do so unilaterally, and Congress is not likely to go along.)
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Many conservatives fell back on time-honored free-market rhetoric: that is, government shouldn't be in the business of picking winners and losers in the marketplace. Sarah Palin derided the Carrier deal as "crony capitalism." The Wall Street Journal editorial board called it a "shakedown" and asked: "[W]ho would you rather have making a decision about where to make furnaces or cars? A company whose profitability depends on making good decisions, or a branding executive turned politician who wants to claim political credit?" National Review's Jonah Goldberg worried that the deal signaled "that industrial policy is back."
Don't call it a comeback. Industrial policy has been here for years.
In his book The Betrayal of American Prosperity, former Reagan administration trade official Clyde Prestowitz argues that the United States has long pursued a national economic strategy. It just happens to be a patchwork of industrial policies that no one consciously adopted but that, nonetheless, is the direct result of federal spending and regulations.
For the last 30 years, writes Prestowitz, America's industrial policy has looked something like this:
Did lawmakers or administration officials consciously and coherently choose to adopt this suite of policies? No. But Prestowitz asserts that such a lack of premeditation doesn't mean the United states eschews industrial policy. It just means we have lousy and often wasteful industrial policy.
In Concrete Economics: The Hamilton Approach to Economic Growth and Policy, Stephen Cohen and Brad DeLong dispel the notion that industrial policy is tantamount to command-and-control dirigiste economics. "We do not propose the content of such a redesign, complete with dubious numerical targets," they write. "That is not how it happened in the successful American past." Concrete Economics points not only to the most cited examples of government-promoted development — from railroads to the internet — but to concatenations of industrial policy that had far-reaching socioeconomic effects.
After World War II, for example, government promotion of affordable long-term mortgages led to suburbs, which led to more highways and cars and washing machines and furniture. All this growth was underpinned by a "steadily growing and secure market for mortgages and automobile loans; and municipal bonds for infrastructure and schools to please the regulated and respectable finance industry."
Industrial policy goes wrong, according to Cohen and DeLong, when it's conducted in the "speculative realms of ideology and its handmaiden theoretical abstractions." Prime example: The bipartisan unleashing of the financial services industry, which begat the Great Recession. When it goes right, industrial policy is "image-able, as in, 'This is the kind of thing we will get.' "
Which brings us back to Trump, Pence, and Carrier.
Where do they think their industrial policy will take us? Do they have a vision of where the American economy should be heading (like, say, President Obama's green-energy policies)? It's obvious that Trump is asking no such questions. He's simply attempting to preserve in economic amber the labor-intensive manufacturing robustness of his nostalgia-added imagination. And he's privileging manufacturing jobs over jobs in the service industry for no sound economic reason.
As FiveThirtyEight's Ben Casselman writes: "A combination of bribes and threats may have saved Carrier workers' jobs — and still only some of them — but it isn't going to bring back the glory days of American manufacturing. Nothing will. The forces that have driven the decline in U.S. factory employment — globalization and automation — are here to stay."
In other words, Trump will no more be able to bring back the economy of 1950 than he will the social and racial hierarchy of 1950.
Create an account with the same email registered to your subscription to unlock access.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Scott Galupo is a freelance writer living in Virginia. In addition to The Week, he blogs for U.S. News and reviews live music for The Washington Post. He was formerly a senior contributor to the American Conservative and staff writer for The Washington Times. He was also an aide to Rep. John Boehner. He lives with his wife and two children and writes about politics to support his guitar habit.
-
Melting polar ice is messing with global timekeeping
Speed Read Ice loss caused by climate change is slowing the Earth's rotation
By Peter Weber, The Week US Published
-
The Week contest: Stick guitar
Puzzles and Quizzes
By The Week US Published
-
'Sports executives ushered a fox into the henhouse'
Instant Opinion Opinion, comment and editorials of the day
By Harold Maass, The Week US Published
-
Trump, billions richer, is selling Bibles
Speed Read The former president is hawking a $60 "God Bless the USA Bible"
By Peter Weber, The Week US Published
-
The debate about Biden's age and mental fitness
In Depth Some critics argue Biden is too old to run again. Does the argument have merit?
By Grayson Quay Published
-
How would a second Trump presidency affect Britain?
Today's Big Question Re-election of Republican frontrunner could threaten UK security, warns former head of secret service
By Harriet Marsden, The Week UK Published
-
'Rwanda plan is less a deterrent and more a bluff'
Instant Opinion Opinion, comment and editorials of the day
By The Week UK Published
-
Henry Kissinger dies aged 100: a complicated legacy?
Talking Point Top US diplomat and Nobel Peace Prize winner remembered as both foreign policy genius and war criminal
By Harriet Marsden, The Week UK Last updated
-
Trump’s rhetoric: a shift to 'straight-up Nazi talk'
Why everyone's talking about Would-be president's sinister language is backed by an incendiary policy agenda, say commentators
By The Week UK Published
-
More covfefe: is the world ready for a second Donald Trump presidency?
Today's Big Question Republican's re-election would be a 'nightmare' scenario for Europe, Ukraine and the West
By Sorcha Bradley, The Week UK Published
-
Xi-Biden meeting: what's in it for both leaders?
Today's Big Question Two superpowers seek to stabilise relations amid global turmoil but core issues of security, trade and Taiwan remain
By Harriet Marsden, The Week UK Published