Tariffs, oligarchs, and the future of democracy
I haven’t written about Trump, tariffs, and trade wars because there is plenty of smart commentary out there, and because I really had (and have) no idea how the whole thing will play out. It seemed plausible to me that Trump might be dissuaded from launching a destructive full scale trade war, that he might use trade policy selectively to gain minor concessions that he could trumpet as major victories or to gain corrupt personal favors from foreign governments. It also seemed possible to me that he might really be stupid and isolated enough – surrounded by hand-picked flatterers – that he really believed his own anti-trade nonsense.
But the tariff situation illustrates the dangerous complacency of our business elites. Here is Krugman today:
When democracies die, big business and wealthy individuals often play a crucial role in their demise. They provide a would-be strongman with financial support; their control of or influence over news media ensures that he receives favorable coverage, while his opponents are trashed. They do this because they expect to be rewarded with policies that favor their interests and imagine that they will in effect be shareholders in the new autocracy.
What comes next is familiar to anyone who studies history (which the oligarchs don’t.) Eventually it becomes clear that they don’t own the dictator they’ve helped install; he owns them. Maybe they’ll like some of his policies, maybe they won’t, but in any case they’re not in control — and they soon learn that criticizing the big man isn’t just fruitless, it’s dangerous.
Read the whole thing.
Here is me from 2021:
This seems about right, though of course speculative, but I have doubts about the big business piece. Yes, some business interests will be close to the ruling party or strongman, and they may gain some degree of regulatory relief, but it would be a mistake for capitalists to think that they would thrive in an authoritarian system. Even authoritarian regimes worry about popular support, and capitalism is not deeply beloved by the masses. Just as the plutocratic wing of the Republican coalition has ceded power to socially conservative voters, business leaders in an authoritarian state would be vulnerable to the needs of the political elite. Capitalists and their businesses would be a source of revenue and jobs to buy public support, convenient scapegoats when things go sour, and a potential threat to the ruling oligarchs. Think about the uneasy position of capitalists in Russia and China.
I still think this is right. Unfortunately, it may be too late for our capitalist leaders and their libertarian pro-Trump intellectual lap dogs to change course.
Trump paused the Mexico tariffs for a month after Mexico’s president agreed to station 10,000 troops at the border. Since most of the fentanyl brought into the US is smuggled in by US citizens at authorized border crossings (not by unauthorized migrants crossing illegally), those addition troops will have no effect, except to give Trump political cover for backing off on tariffs that would harm US citizens. When the announcement was made, the stock indexes all rose (albeit still in negative territory as I post this).
It is interesting how the prevailing narrative focuses on emotive terms like “trade war,” “inflation,” and how much consumers will be hurt. Of course, all of this may be true. But as anyone has taken economics knows, there are other effects as well, effects which are mysteriously overlooked or downplayed. Granted, if you search hard enough, you can find commentary of those effects, not all of which are bad.
The prevailing narrative seems to be a mirror image of economists’ full-throated “free” trade advocacy of the 1990s. Then the message was all about how much Americans would benefit. Granted, some Americans benefited handsomely, particularly the corporations who got access to cheap labor and relief from regulations protecting labor, the environment, etc. And they made beaucoup bucks, much of it posted in off-shore accounts, tax free.
And then there were the unacknowledged downsides, such as millions of jobs lost, particularly in the Rust Belt, which has become solid Republican territory.
Just as the 1990s “free” trade was driven by corporations promoting laissez-faire, I suspect the current narrative is driven mostly by these same usual suspects. When I start to see mainstream reporters talk about effects beyond harm to consumers, I will start to take notice. I know those effects are there. Meanwhile, I am waiting…
And the president of Mexico says Trump agreed to help stop the flow of weapons into Mexico. Theater! Pure theater! There will be guacamole for the Super Bowl.