Stephen MacLean considers “Trumponomics” from a classical perspective
On the campaign stump, Donald Trump’s visceral answer to manufacturing decline has been called a self-defeating return to the processes of primitive economics. But Trump’s route to powering America’s revival does lead through a mill — John Stuart Mill.
Trump’s economic prescription to ‘Make America Great Again’ by imposing tariff walls to foreign trade has been lampooned by mainstream economists as equating the Great Depression hysteria that gave rise to the Smoot-Hawley tariff act, which saw affected nations impose retaliatory trade restrictions.
Many of these same economists prefer their own Depression-era madness, in the form of Keynesian stimulus that argues that downturns are caused by a lack of aggregate demand, requiring government spending to prime the pump and restore consumerism.
Long before Lord Keynes, however, nineteenth-century classical economists had debunked this fallacy, notably J. S. Mill:
There is nothing which impresses a person of reflection with a stronger sense of the shallowness of the political reasonings of the last two centuries, than the general reception so long given to a doctrine which, if it proves anything, proves that the more you take from the pockets of the people to spend on your own pleasures, the richer they grow; that the man who steals money out of a shop, provided he expends it all again at the same shop, is a benefactor to the tradesman whom he robs, and that the same operation, repeated sufficiently often, would make the tradesman’s fortune.
‘In opposition to these palpable absurdities,’ Mill continued, ‘it was triumphantly established by political economists, that consumption never needs encouragement (emphasis added).’
But back to Donald Trump, who has reserved his severest ire for Americans, both manufacturers who have relocated operations abroad and trade negotiators who have signed weak agreements with their foreign counterparts and who, Trump insists, need to read The Art of the Deal. The faults of these latter may absolve the former, who must abide by the fiduciary interests of corporate stockholders.
Foregoing the legitimate question about the efficacy of U.S. fiscal dictates that induce home industries to take advantage of tax structures in foreign lands — and penalise them when they try to patriate capital — what policy should a possible Trump administration advocate for congressional legislation?
The answer lies in entrepreneurship and innovation. As Mill explained, ‘What a country wants to make it richer, is never consumption, but production.’
Innovation is not at the beck-and-call of command-and-control economies, but can be encouraged and nurtured by free markets. Even friendly governments can be more often a hindrance than a help: whether by erecting hurdles that dampen investment and production, or by regulations that aid established enterprises that have the ear of the State to stifle upstart competition.
Mill directed politicians to two points. First, ‘that no obstacle shall exist to prevent those who have the means of producing, from employing those means as they find most for their interest’ — of which punitive taxation and red tape are encumbrances to entrepreneurs. Trump addressed this concern during his Florida Primary victory speech at Palm Beach:
You have corporate inversions. You have people who can’t get their money back into the country because the politicians can’t get along, they can’t make a deal. Everybody agrees, Democrat and Republican. Everybody agrees the money should come back. There’s two-and-a-half trillion dollars outside of this country. Everybody agrees that the money should be here. And the politicians for three years haven’t been able to make a deal. And we could make a deal. There’s an example of something that you could do, if I sat down with a few of the senators, a few of the congressmen, you could make a deal on that in ten minutes if you knew what you’re doing, because everybody wants to do it. And companies are actually leaving our country to get their money, not only because are taxes are too high, which we’re going to lower, by the way. But companies are leaving our country in order to go and get money, that’s their money, because there’s no way of bringing it in. So we’ve got a long way to go.
Second, ‘that those who have not at present the means of producing, to the extent of their desire to consume, shall have every facility afforded to their acquiring the means, that, becoming producers, they may be enabled to consume.’ This is the mantra of the classical theory of markets: that supply constitutes its own demand.
Therein lies the rub for recessionary America and for Mill. ‘There will never, therefore, be a greater quantity produced, of commodities in general, than there are consumers for,’ he soothed, with a caution: ‘But there may be, and always are, abundance of persons who have the inclination to become consumers of some commodity, but are unable to satisfy their wish, because they have not the means of producing either that, or anything to give in exchange for it.’
Innovation is the fount of wish-fulfilment; production gives rise to employment; and market exchange equates to consumer satisfaction.
Who would deny that Trump is the master salesman most attuned to Mill’s message? National Post columnist Conrad Black writes that he has captured the imagination (and vote) along the socio-economic spectrum as ‘a worldly man who knew how to make the system work and rebuild American strength and public contentment.’ (Lord Black thus puts to rest the notion that all Canadians loath Trump and keen to entice disaffected Americans to migrate to a Dominion island oasis.)
And Steven Malanga of the Manhattan Institute is also upbeat about Trump’s potential for American business. His support, surmised one association of CEOs, was ‘focused on the fact that the Donald says not only that he wants to make America great again but also that the source of the nation’s greatness is its business community. That’s not a message that business owners hear consistently from other Republican candidates.’
Even when Trump goes against business and economic orthodoxy on the practice of free trade, Malanga notes that ‘not every business owner feels that unrestrained free trade at all costs is a plus. Some who have had to compete feel that Washington has allowed foreign governments — China’s in particular — to tilt the playing field too far in their own favor.’
Trump avows he is a free trader. Were he elected President, his ability to lead America toward better trade deals than those negotiated by predecessors remains an open question. But it is undeniable that innovation is one route to a growing economy, employment opportunity, and consumer happiness. If markets are sluggish, as J.S. Mill observed, the answer lies not in government intervention but in allowing the entrepreneurial spirit full rein. And who more embodies that spirit than Donald Trump?
Stephen Michael MacLean is a freelance researcher, residing in Canada. He blogs as the Organic Tory at the Disraeli-Macdonald Institute