Trump’s Market Interventionism and Cronyism

Corporatism or crony capitalism has already found its way into the Trump administration. In less than a month, it’s the new boss same as the old boss.

February 27, 2017

By: Bobby Casey, Managing Director GWP

cronyism corporatismAs a small business owner, few things bother me more than corporatism or crony capitalism. I hated it under Obama, and I hate it still under Trump. For a guy who loves to decry market manipulations out of China, Trump is swift to intervene and manipulate the market on the American side of things.

You’d think that Trump supporters would hold him to the same standards as any democrat, but I’m not seeing it. Apparently it’s up to libertarians to maintain objectivity, and there are NO sacred cows here.

In approximately one month, Trump has outed himself not only as a market bully, but a total crony capitalist. When I hear or read words like: “Companies are not going to leave the United States anymore without consequences,” I get upset.

Here we go again with Trump’s punitive reactions that bear no resemblance to a sustainable solution.

While President Trump has received applause for “keeping jobs in America”, that’s not the whole story. I mean, did anyone stop to ask: “Hey, why would Carrier forego $65 MILLION in savings by moving abroad, and stay in the US?” What changed their minds?

The New York Times did a write up on the announcement:

While Carrier will forfeit some $65 million a year in savings the move was supposed to generate, that’s a small price to pay to avoid the public relations damage from moving the jobs as well as a possible threat to United Technologies’ far-larger military contracting business.

“Roughly 10 percent of United Technologies’ $56 billion in revenue comes from the federal government; the Pentagon is its single largest customer. With $4 billion in profit last year, the company has the flexibility to find the savings elsewhere.

“Members of Congress have been pressing to punish big military contractors if they move jobs outside the United States.”

Carrier makes the air conditioning units as a subsidiary of United Technologies, who makes goodies for government.

But it did save those jobs, Bobby!

Indeed it kept them here a little longer. And no doubt, Trump is absolutely revisiting the corporate tax codes. But two things are wrong here: the first is that Carrier or United Technologies can’t stand on its own and needs government to stay afloat; the second is that we, as tax payers, have to pay to keep businesses here to employ us.

Both are a horrible testament to our economic situation. If you want to tack on a third problem, these contracts for the Pentagon almost certainly mean the wars aren’t going anywhere.

Trump has been ruthless in calling out car manufacturers as well. He went after GM for manufacturing their Cruze in Mexico. He took to Twitter with this:

General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A.or pay big border tax!”

It’s true. They do build the Cruze hatchback in Mexico. But here’s the true predicate of that thought: they aren’t sold to American dealerships. They are sold in foreign markets. For the same reason Toyota and BMW have manufacturing plants in the US, GM has factories in Mexico to build market share in other countries.

Daniel Griswold, a senior research fellow at the Mercatus Center, worries, “Trump’s economic nationalism will make it harder for American brands like G.M. and Ford to compete in growing foreign markets like Latin America and might counter-productively hurt those companies if they lose market share to foreign rivals.

Cabinet positions and favors for those who play nice with the president, tariffs and shameful mischaracterizations if they don’t.

This is all within a month of holding office. Trump has set a very fascistic tenor and cadence for how he views the relationship between government and business. As a libertarian, I don’t think there should even be much of a relationship other than the facilitation of truly free trade and commerce.

The truth is, companies shouldn’t have to threaten to leave the United States to get breaks in taxes. Employees and their jobs shouldn’t be bargaining chips and showcased for political theater. And the president of the United State should not be singling out companies as winners or losers, much less to a point that could affect their stocks and existing employees, just to make them an example.

This goes back to my original point: Trump hasn’t solved anything. It’s only been a month, so solutions could still be in the making; however, the solutions he’s at least discussed so far, he’s not delivered on. Draining the swamp? Looks like he just replenished the swamp. Quite a few stale actors including but not limited to:

  • Elaine Chao, who served in George W. Bush’s Cabinet as labor secretary and is currently a board member at Wells Fargo and is Mitch McConnell’s wife, is the US Transportation Secretary.
  • Linda McMahon, who is one of the largest donors to the Trump Foundation, is the head of the Small Business Administration
  • Gary Cohn, Goldman Sachs president tapped to lead the White House National Economic Council
  • Steven Mnuchin, former Goldman Sachs hedge fund manager is now the incoming Treasury Secretary
  • Steve Bannon, former Goldman Sachs investment banker and now the new senior White House adviser

This isn’t new blood. For a guy who criticized Hillary as being rooted in Wall St. and establishment politics, Trump hasn’t deviated too far from that path himself. His dictatorial approach is being confused with leadership because we had milk toast shoved down our throats for the better part of eight years. But Americans should not lose sight of free market ideas, and mistake a strong pimp hand for political principle.

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Comments

  1. Rocky Dune says:

    Everyone is smart… oh, yes.
    You are just losing one simple point. Imagine that YOU have to find the right people with ENOUGH experience to support your policies and to run the departments quickly but DNC attempts to delay the confirmations. Trump’s victory was not expected even by him personally. Al the same time, let’s be honest, would not you reward people who helped you to win?

    I agreee that not everyting there as you or I expected. Take into consideration the enormous resistance from DNC and even some RNC traitors like Grahm and McCain, and the full-blown information war on Trump and his team. All together is unhealthy environment in wich his must find the people who can help him to run the country. DNC applies pressure at every corner, and there is no agreement even inside of the Republican party. There is all kind of legal pressures from various groups of people and organizations. And all of it needs the response.

    RNC is powerless now. All together point to the serious attempt to undermine Trump within short period of time and force him to fail. It is supported by Soros’ money, Obama’s new organization with 250+ locations, and more…
    It is easy to critisize, right?

    • Kelly Diamond says:

      Okay but that could be said of nearly everyone… and certainly Obama. But you don’t get a pass because the road is hard. If that were true then why bother having a president? They are just a titular head. I don’t agree with much of what Gary Johnson has said, but as governor, he was notorious for his exercising his veto power. The country elected him on his promises and him NOT being an insider. That he is behaving just like the rest means the president is a puppet, he was easily corrupted, or he really is just too green to hold office.

      It is easy to criticize unprincipled people. Remember when Bush said he had to abandon capitalist principles to save capitalism? That’s what this is. I have to spit on public faith to preserve public faith.

  2. Markus Rafael says:

    Hey Bobby, thanks for the article.

    But idealizing free market rhetoric is perhaps premature since we really are not even close to that yet when it comes to global trade. For any social system to work, there has to be rules in place and those rules are the same for everyone. We have global players like China who respect none of these rules. Yes it’s cheap to manufacture there but what is the real price regarding ecology, human rights, etc?

    We need a new global system in place that ensures free trade but we need to have rules in place and some kind of justice/police system to make sure those rules are followed.

    I would love to hear more people talk about solutions instead of just describing the problems. How do we get from here to there? And what/where exactly is there?

    • Kelly Diamond says:

      What do you think would work better? Codified rules (as you’ve suggested) or contractual agreements?

      The EPA, FDA, USDA, and SEC have all demonstrated that “rules” don’t help markets, but rather hinder them. One of the biggest issues in all these various regulatory agencies is the cronyism. These agencies are recruiting grounds for private sector cronies. The FDA and SEC are notorious for their revolving doors. So no, I think that has been given it’s fair shake at things, and has proven to be a failure.

      I would like to see more contracts and agreements where all parties come to terms and are held accountable.

      The real price ecologically and civilly? It’s funny that first world constituents even feel they have the right to ask such a thing. We already had our industrial revolution. We already evolved without regard for any rights or ecological consequence, and have since become wealthy enough to afford such considerations. It was only through that refining process that we came out on the other side prosperous enough to afford such luxuries as cumbersome regulations that dwarf most national GDPs. But you want the little up and coming developing countries to start off with that burden. We do that in the US to our entrepreneurs: saddle them with ridiculous regulations that their larger competitors didn’t need to adhere to when they were growing.

      What you’re suggesting is tantamount to holding a child to adult standards. Just skip the intermediary parts where you’re messy and recalcitrant and go straight to adulthood where you are like me! Evolution and growth don’t work that way. It’s messy. What developing countries DO have is the benefit of case study and the example of profitable best practices. The shady dealings of other countries won’t be remedied by sanctions and policing. It no more will work on a nation level than it does on an individual one. They just become better scoundrels and the black market expands that much more. What they really need is open competition. A competitor who wins on a qualitative level, will win the hearts of the talent pool and consumer base while producing. A policing system drains economies and produces nothing.

      How we get there is by lifting the burden of regulatory regimes and the threat of tariffs and sanctions. Stop threatening people in business thinking you can strong arm success out of them. Reward good practice, allowing for every experiment to play out and battle freely and opening in the market place.

      The greatest leaders and presidents in human history were great for what they didn’t do… not what they did. You seem to think doing MORE is an inherent solution. It’s not. Less is more in economics. And the solution is simply let the businesses come to agreements and solutions between themselves. So long as it doesn’t infringe on the rights of others, the state has no place in it. If there is a demonstrable violation of rights, the state can come in and address it as they would for anyone else. If the country itself has no regard for rights, well, then the businesses and individuals have to make a decision as to whether it’s worth staying there.

  3. Kevin Beck says:

    I assume you meant to say that Carrier was a subsidiary of United Technologies, instead of United Technologies being the subsidiary company. But every other point of the article I agree with 100%, because this is an issue where we will get the split analysis based upon which way (politically) the speaker leans when the wind blows.

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