DRI-173 for week of 8-2-15: The Donald Trumped

An Access Advertising EconBrief:

The Donald Trumped

The office of President of the United States has been held by some strange specimens since George Washington first gave in to public demand in 1792. The range of aspirants to the job has been even broader, running from children to comedians to ventriloquist’s dummies to just plain dummies. There may never have been a more outrageous candidate than Donald Trump who was (1) competing for the nomination of a major party; (2) taken seriously by all and sundry; and (3) who made a king-sized dent in the polls immediately upon announcing for the job.

Trump’s Presidential-campaign announcement speech created a sensation. The public is still talking about it and so are the other candidates. (There are so many Republican candidates that when they talk simultaneously it creates a deafening roar.) Trump’s extemporaneous remarks focused disproportionately on the subject of illegal immigration and international trade. That puts his remarks within the purview of this space.

In order to preserve the unique flavor of his speech, Trump will be quoted extensively. As will soon become clear, it is hardly necessary to wrench Trump’s words from their context in order to reveal him as one of the most economically illiterate men ever to seek the office of President.

Introductory passages are in plain type. Trump’s comments are in quotes. The valid economic analysis – envision Trump being interrupted in stop-motion – is in italics.

Trump on Trade

When lecturing on any topic, you can’t go wrong by starting with fundamentals. Trump began the announcement of his run for the Presidency by burnishing his credentials as an expert on the subject of international trade.

“When was the last time anybody saw us beating, let’s say, China in a trade deal? They kill us. I beat China all the time. All the time.”

Trump has introduced a novel understanding of the concept of a “trade deal.” It implies that one side tries to defeat the other, that a deal is a bargain struck between adversaries. In actuality, this does not apply to trade deals negotiated between countries just as it does not apply to trade between individuals. Commercial trade between individuals – whether intranational or international in scope – is voluntary, hence mutually beneficial. If it were not so, the voluntary character would preclude it. The same is true, at least in principle, for nations. The difference between a negotiated trade deal and voluntary individual trade comes when we consider whether the negotiators have truly represented their own national interests or, instead, sectoral “special” interests. But that doesn’t change the fact that negotiators to a trade deal are striving to achieve mutual benefit, it merely makes the content of “mutual benefit” subject to what economists call the “agency problem” – the nation’s consumers may not have anybody representing their interests at the negotiations.

Trump’s adversarial concept of negotiation does apply to certain types of negotiations, such as those between victor and vanquished at a war’s conclusion, or between those in power relationships rather than voluntary ones. A plea bargain is an example of a negotiation in which one party’s acknowledged inferior status severely limits their negotiating options. These are in no way analogous to international trade or commerce in general. This fact can be established by reference to the noted author and business expert Donald Trump in his bestselling book “The Art of the Deal.” In other words, Trump the Presidential candidate is vociferously contradicting Trump the billionaire businessman and celebrity author.

Trump’s claim that he, Trump, “beat[s] China all the time” is indecipherable in this context since he is not a trade negotiator nor is he in competition with the nation of China in any meaningful economic sense. The straightforward interpretation of this sentence is that Trump suffers delusions of grandeur, not unlikely given various quoted passages that follow.

“When did we beat Japan at anything? They send their cars over by the million and what did we do? When was the last time you saw a Chevrolet in Tokyo? It doesn’t exist, folks. They beat us all the time.”

Trump’s reference to “we” and “Japan” in the context of automobile production is a classic example of the “collective fallacy;” Japanese cars were (and are) produced by particular companies that happen to be domiciled in Japan. These companies are no more physically representative or metaphorically symbolic of Japan as a whole than (say) General Motors is of the United States of America. Moreover, the most successful Japanese automakers have established production facilities for their cars in the U.S., thereby defusing the fallacious claims that their activities were somehow “stealing our jobs.” The end-in-view behind all economic activity is consumption. None of the countless millions of Americans who drove automobiles produced by those Japanese companies would dispute the economic value of their activities. In no sense were those drivers – or any other American – “beaten” by the competition meted out by Japanese automakers to American car makers, just as Americans have always benefitted from intranational competition between American firms.

Trump’s characterization of the Japanese as the Mongol hordes of international trade seems bizarre when we look out our windows and see that Japanese economic growth has been flat on its back for over two decades. How does this square with Trump’s tale of conquest?

Intraindustry (two-way) trade is not unheard of in the international realm, but the absence of Chevrolets in Tokyo says nothing of consequence about American industry or politics.

Trump is continuing to employ the metaphor of war in discussions of business and trade. This is bad form in a layman, incredible in an experienced businessman and utterly inexcusable in a (Republican) Presidential candidate.

“When do we beat Mexico at the border? They’re laughing at us, at our stupidity. And now they’re beating us economically. They are not our friend, believe me. But they’re killing us economically.”

Once again, we are at war – this time with Mexico, who is “beating us economically.” Since trade is voluntary and mutually beneficial, this is an oxymoron – fittingly uttered by a moron. For decades, opponents of Mexican immigration into the U.S. derogated the Mexican government for its inept economic management, which ostensibly created such a poor economic climate that its poor had no alternative but to migrate here. Now Trump is excoriating Mexico for being too successful; its politicians are evil geniuses (“they are not our friend”) who are cleverly plotting our economic demise.

Meanwhile, we are now the stupid ones – everybody except Trump, that is. The situation has changed 180 degrees, except that Mexican politicians are still villains, Mexican immigrants (as we will see below) are still bad and Americans are still helpless victims. Except for Trump, that is.

“The U.S. has become a dumping ground for everybody else’s problems.”

Considering that what is being “dumped” here are goods and services and people to make goods and services, it would seem that the world is chock full of countries that would love to have these “problems” foisted on them.

Trump on Illegal Immigration

“…when Mexico sends her people, they’re not sending their best. They’re not sending you, they’re not sending you. They’re sending people that have lots of problems and they’re bringing those problems with us [sic]. They’re rapists. And some, I assume, are good people.”

This section includes probably the most quoted line from any presidential announcement speech. The phrasing is strikingly inapt. Immigrants are not “sent;” they voluntarily choose to leave their country of residence. This is a momentous decision. It entails learning a new language, adapting to an alien environment with different mores, absorbing a foreign culture and potentially accepting foreign citizenship. Emma Lazarus’s famous poem suggests that 19th-century immigrants to the U.S. were the “wretched refuse” of foreign shores and there was much truth in that. But it takes guts, initiative and courage to emigrate – and that goes double for illegal immigrants who are risking their lives just by crossing the border. The subject of immigration has attracted scads of research that overwhelmingly supports these common-sense conclusions. We may deduce that immigrants are not normally “the best” that foreign countries have to offer because that would vitiate the desire to leave. On the other hand, the worst generally lack the gumption to make the effort or to succeed if they do. 

What could Trump possible be thinking of? At the time he spoke, the only possible connection with reality seemed to be the notorious “Mariel boatlift,” in which Cuban dictator Fidel Castro reportedly deported a collection of criminals and undesirables to the U.S. in 1980. Since this was not voluntary immigration, though, it had nothing to do with Trump’s ostensible subject. Incredibly, Trump subsequently confirmed this connection by later categorically accusing the Mexican government of doing essentially what Castro had done – deporting criminal undesirables to the U.S. in order to cause mayhem here. Needless to say, he offered no evidence to back up this fantastic charge.

Meanwhile, Trump’s astounding decision to demonize immigrants as drug dealers, criminals and rapists made him an instant hero among the nativist lunatic fringe and an instant villain everywhere else. The respectable research on this issue has long been virtually unanimous. It is briefly summarized by Jason Riley in The Wall Street Journal (07/15/2015): “…while the illegal immigrant population in the U.S. more than tripled between 1990 and 2013…’FBI data indicate that the violent crime rate declined 48% – which included falling rates of aggravated assault, robbery, rape and murder.'” (Property crime fell by 41% as well.) Just in case anyone should suspect the presence of confounding factors, Riley makes it more explicit. “‘For every ethnic group without exception, incarceration rates for young men are lowest among immigrants…This holds true especially for the Mexicans, Salvadorans and Guatemalans who make up the bulk of the undocumented population.” If we single out states where large populations of illegal immigrants are known to live, that still holds true. “…Numerous studies going back more than a century have shown that immigrants – regardless of nationality or legal status – are less likely than the native population to commit violent crimes or to be incarcerated.” If anything, this differential has grown more pronounced in recent years. Since Trump cites no research, his audience must assume he relies entirely on episodic reports of violence committed by illegal immigrants.

To top it all off, the makeup of the immigrant population today (particularly the illegal segment) originates predominantly from Catholic countries and thus tends to be deeply religious. In The Wall Street Journal, Russell Moore and Samuel Rodriguez point out that Trump offended evangelical Christians throughout America with his repeated attempts to stigmatize immigrants.

“But I speak to border guards, and they tell us what we’re getting. And it’s only common sense. They’re sending us not the right people.”

After listening to Trump, it is hard to suppress the reflex to demand that he produce one border guard – just one – to support his claims. After all, illegal immigrants are – by definition – people not caught by border guards. It is difficult to consider border guards as the reigning authorities on those they don’t catch. If illegal immigrants are really, truly drug dealers, criminals and rapists, why does Immigration and Customs Enforcement (ICE) spend the bulk of its time staging raids on legal businesses like packing plants, construction firms and hotels? Isn’t it odd to find drug dealers and rapists spending the bulk of their day doing hard work?

And this is what Trump calls common sense?

“It’s coming from more than Mexico. It’s coming from all over South and Latin America, and it’s coming probably – probably – from the Middle East. Because we have no protection and we have no competence, we don’t know what’s happening. And it’s got to stop and it’s got to stop soon.”

As noted above, the bulk of illegal immigration apparently stems from Mexico, El Salvador and Guatemala – hardly “all over Latin America.” Trump cites no evidence of illegal immigration from the Middle East, although presumably he could have cited the legal immigration of several of the 9/11 bomber pilots if he chose. Trump’s stream-of-consciousness prose is so confusing that we don’t know if he is trying to warn us of a danger that only he can see or if he is concerned about our common ignorance. But his use of the pronoun “we” when bemoaning our lack of competence is well-chosen. His hints of a worsening situation that must be corrected for fear of dire consequences are ironic given (1) the existence of illegal immigration for decades; and (2) its slackening since 2009 as U.S. economic growth has slowed relative to Mexico’s.

“I would build a great wall, and nobody builds walls better than me, believe me, and I build them inexpensively. I will build a great, great wall on our southern border. And I will have Mexico pay for that wall.”

Reviewing the details of Trump’s speech and its later follow-up, it seems that (1) “Mexico is not our friend”; (2) Mexico’s political leadership is deliberately deporting criminals and undesirables to the U.S. in order to do us harm; (3) if elected President, Trump intends to build a massive wall stretching the length of the U.S. border with Mexico (one of the world’s longest); and (4) if elected President, Trump intends to force the Mexican government to pay the costs of construction for the wall. Currently, millions of legal border crossings between Mexico and the U.S. occur daily, but Trump apparently intends to replace this mutually beneficial status with a state of hostility, perhaps even war. Only war, or its threat, could be expected to achieve his aims.

 

Trump on What’s Wrong With the U.S.

“…a lot of people up there [sic] they can’t get jobs, they can’t get jobs, because there are no jobs; because China has our jobs and Mexico has our jobs. They all have jobs.”

Overlooking the obscurity of Trump’s prose, it is easy to spot the ancient “lump of labor” fallacy. There is no fixed quantity of jobs for the world to fight over; instead, the number of jobs varies with the kind and variety of goods and services demanded by consumers and produced by firms. Until Bill Gates and Steve Jobs came along, we didn’t realize that many of the jobs done today even existed. Many jobs performed throughout mankind’s history no longer exist and some done today will no longer exist tomorrow. 

No country holds a property right on jobs because economic efficiency dictates that production should occur at its most efficient locus. Since that varies with time and circumstance, jobs move from place to place within a country and between countries. As consumers, we shouldn’t want it any other way and we don’t – unless our name is Donald Trump and we need ammunition to fuel our Presidential ambitions.

Trump thinks so little of his audience that he expects us to overlook obvious inconsistencies in his argument. Mexico is one of Trump’s villains. (Mexico’s government or its citizens? Or both? Trump is willing to leave it to our imagination.) Mexico is villainous because its policies are so successful; it beats us and all its citizens have jobs while ours don’t. Uh…but if all its citizens have jobs and Mexico’s policies are so successful and they are beating us, why is Mexico flooding us with immigrants? Why is Mexico filled with criminals and undesirables that she must export to the U.S.? Why doesn’t all of Latin America simply emigrate to Mexico, where they can speak Spanish, instead of to the U.S.?

Trump has exquisitely timed his revelation that “China has our jobs.” As he spoke, pundits were alarmed at the prospect that China’s imminent economic collapse was the real danger to the world economy, not Greece’s.

“I’ll bring back our jobs from China, from Mexico, from Japan, from so many places. I’ll bring back our jobs and I’ll bring back our money.”

There are no reports from Japan on the reaction to Trump’s contention that they have our jobs – perhaps they were stunned into submission since the Japanese have suffered a historic lapse of economic growth for over two decades. Trump’s promise to “bring back our money” to a nation awash in liquidity must qualify as one of the great economic howlers of all time. Even the Japanese, the first to resort to quantitative easing as a full-bore policy tool, have reverted to this easy-money stance once again. If there is one thing the world doesn’t need, it is more money.

“…when was the last time you heard that China is killing us? They’re devaluing their currency to a level that you wouldn’t believe. It makes it impossible for our companies to compete, impossible. They’re killing us.”

If economics were like the Olympics, in which “our” companies competed with the rest of the world and all our citizens got satisfaction from their “gold medal” business success, Trump might have a point. But the analogy is way off base. We get satisfaction from the kind, quality and variety of goods and services produced, regardless of who produces them. Economically, there is no such thing as “our” companies, despite never-ending attempts by import-competing producers to seduce our allegiance on purely patriotic grounds.

In the 1930s, governments used competitive currency devaluation to win brownie points with their business constituents. But every commentator has cited this as a major contributor to the severity of the Great Depression. When one country devalues, others retaliate and the end result is that world trade shrivels to a cinder. Fortunately, that has yet to occur in our day. Trump’s repeated insinuation that the Chinese are evil geniuses at the Oriental practice of currency manipulation is yet another tactic of demonization.

“…you’re [Ford, who is proposing to build a $25 billion car- and truck-parts plant in Mexico rather than the U.S.] going to take your cars and sell them to the United States, zero tax, just flow them over the border? Where is that good? It’s not… Every car and every truck and every part that comes across the border, we’re going to charge you a 35% tax.”

Trump has taken the very concept of economics – the meaning of economic efficiency and consumption as the purpose of economic activity – and stood it on its head. In effect, he has said: “As President, I will penalize a firm for producing in the most efficient place if that place lies outside the borders of the U.S., and in the process penalize every citizen of the U.S. who is a potential consumer of that firm’s goods. In so doing, I will create a large aggregate amount of harm for a huge number of people while creating a small aggregate benefit (but large individual benefit) for a small number of people. In other words, I will create the reverse of economic growth.” This is the antithesis of free trade and mutually beneficial voluntary exchange. The Founding Fathers deliberately designed the Constitution to prevent this kind of thing from happening in interstate and intrastate commerce, but Trump is calling it a great thing in international trade.

“…I’m a free trader. But the problem with free trade is that you need really talented people to negotiate for you. If you don’t have talented people, if you don’t have great leadership, if you don’t have people that know business, not just a political hack that got the job because he made a contribution to a campaign, which is the way all jobs, just about, are gotten, free trade terrible” [sic].

Having spent his entire speech trashing everything that the concept of free trade stands for, Trump now asserts that he is a free trader. Taken at face value, this is a ghastly joke.  In fairness to Trump – the last person on earth who deserves a scrupulous effort in that direction – this attitude is common in the business world. Businessmen often say they would favor free trade if only the world didn’t put them at a disadvantage. But the purpose of free trade is to exploit whatever differing circumstances exist in different places – that is what gives rise to the differences in cost and price that make free trade profitable to consumers. If everything were equal everywhere and we had the “level playing field” that business demands, free trade would be superfluous and it wouldn’t occur.

Trump seems oblivious to the whole idea of voluntary trade between people; he refers only to negotiated trade deals between governments. Trump claims that we need “people that know business,” but he obviously doesn’t know it himself.

“…you know, China comes over and they dump all their stuff and I buy it. I buy it because, frankly, I have an obligation to buy it because they devalue their currency so brilliantly, they just did it recently, and nobody thought they could do it again…and it’s impossible for our people here to compete.”

One can only dissolve in helpless laughter when Trump, in the process of hard-selling himself as omnicompetent and omnipotent, suddenly blurts out that he is mesmerized by the brilliance of China’s monetary manipulation. The man who is going to force nations to do his bidding is hypnotized when China “dump[s] their stuff” and has to buy it because “they devalue their currency so brilliantly.

Trump Cleanup

In order to convey Trump’s sense of his own importance, this analysis includes a summary of Trump’s statement of intention regarding various non-economic (or marginally economic) matters. To wit, Trump will personally:

Destroy ISIS.

Save Social Security, Medicare and Medicaid without cutting benefits for recipients simply by eliminating waste, fraud and abuse in those programs.

Renegotiate all our foreign-trade deals.

Reduce our unsustainable federal-government debt – which he estimated variously during the speech at $16 trillion, $8 trillion and $18 trillion.

Rebuild our infrastructure at one-third the cost that our governments now pay.

Deal with the threat(s) posed by China.

End Common Core.

Repeal ObamaCare.

Rescind Obama’s executive immigration order.

Stop Iran from getting nuclear weapons.

Find the General Patton and General MacArthur in the U.S. military.

Trump made no mention of the fact that presidents lack the authority necessary to accomplish almost all the things he promised to do.

Trump in Summation

Readers who are convinced that Trump must have had something good and worthwhile to say in his Presidential announcement are encouraged to consult the text and try to find it. They will discover that this analytical synopsis has accurately portrayed a man so self-absorbed and heedlessly self-confident that he has not performed the routine self-criticism demanded of a public performer, let alone a public servant.

Americans benefit enormously from the practice of immigration. Key industries such as construction, agricultural labor, hospitality and restaurant service are staffed with immigrant labor to a predominant or important degree. We gain from this in the same way as we gain from domestic oil produced by processes such as fracking. In this sense, immigration is a “production process” that makes cheaper and/or more productive labor available, just as fracking is a production process that makes oil recovery more productive. Some 25 years ago, economists Stephen Moore and Julian Simon conducted a poll of economists in which they asked whether the benefits of immigration depended on whether immigration was legal or illegal. Over 90% of economists surveyed said it did not matter. The only surprising thing is that the vote wasn’t unanimous, since the benefits provided by immigration do not depend on how the immigrant arrived in this country. Trump’s speech displayed no cognizance of this economic reality.

No Republican in living memory has flaunted utter ignorance of economics so brazenly as Donald Trump. Trump’s strong showing in the polls after his announcement is proof that the Party is in danger of becoming incoherent to the public or worse. Trump is a modern-day Senator Bilbo; his way leads to extinction.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s