The Rise of the Zero-Sum Pie-Shrinkers
The Donald Trump administration’s crackdown on travel to the U.S., although targeted at just a few nations and pitched as a terrorism-fighting move, has led to not-unreasonable worries that getting in and out of the U.S. will soon become a lot more difficult for all foreign nationals.
For businesses and others (universities!) that depend on foreign talent, foreign customers or both, this is understandably alarming. As Christopher Mims put it in a Wall Street Journal column today on the tech industry’s concerns:
Venture capitalists, executives and engineers I spoke to consistently made the same argument: In 2017, politicians who try to unduly impede the free movement of tech workers stand to deprive their home country of revenue and employment, as well as all the additional support, service and administrative jobs each of those highly paid workers creates in a community.
Yes, restricting immigration -- especially in the inconsistent, hostile, shoddy way that it was done last weekend -- is bad for business. So is restricting trade, and picking foreign-policy fights with allies. In general, business leaders and investors seem to be waking up from their post-election dream that the Trump years would just be one long profit-boosting parade of tax cuts, deregulation and infrastructure spending.
This is going to lead to some interesting conflicts within the Republican Party, and even within the Trump team. It may bring an economic downturn or even a financial crisis, although I wouldn’t go predicting that just yet. In the meantime, it seems important to note that for the people who seem to be calling the shots in the White House, including the president, the fact that their trade and immigration policies may hurt some businesses is a feature, not a bug.
We’ve just been through a long era during which discussion of economic policy was largely about growing the pie from which all of us partake. Yes, Democrats have been a bit more interested than Republicans in redistributing the pie through taxes and government spending. But economic advice givers in both parties had since the 1970s been focused mainly on what they think will stimulate growth. Not anymore:
Who cares if productivity numbers tick down, or if our already somnambulant GDP sinks a bit further into its pillow? Nearly all the gains of the last 20 years have accrued to the junta anyway. It would, at this point, be better for the nation to divide up more equitably a slightly smaller pie than to add one extra slice -- only to ensure that it and eight of the other nine go first to the government and its rentiers, and the rest to the same four industries and 200 families.
That’s from the famous-within-certain-circles essay “The Flight 93 Election,” published in September on the website of the conservative Claremont Review of Books. The Weekly Standard’s Michael Warren reported today that its pseudonymous author is actually Michael Anton, a former George W. Bush speechwriter who has spent the past few years working at Citigroup and BlackRock but is now a national-security aide in the Trump White House. The “junta” he’s talking about is the pro-business, pro-globalization bipartisan elite -- you know, the people he worked with at Citigroup and BlackRock.
The globalists gutted the American working class and created a middle class in Asia. … That's what the Democrats missed. They were talking to these people with companies with a $9 billion market cap employing nine people. It's not reality. They lost sight of what the world is about.
Trump has appointed a few globalist junta members to top posts, 1 so it can be hard to tell whether he fully shares these concerns or just instinctively thinks like a real estate guy from a small island. Adam Davidson offered this analysis in the New York Times in April:
His whole worldview is based on a rent-seeking vision of the economy, in which there’s a fixed amount of wealth that can only be redistributed, never grow. It is a worldview that makes perfect sense for the son of a New York real estate tycoon who grew up to be one, too. Everything he has gotten -- as he proudly brags -- came from cutting deals. Accepting the notion of a zero-sum world, he set out to grab more than his share. And his policies would push the American economy to conform with that worldview.
So it looks like our country has been taken over by a posse of zero-sum pie-shrinkers.
Before you go and dismiss them as backward-thinking troglodytes who should be consigned to the dustbin of history, though, it’s probably worth going over what the positive-sum, pie-growing approach (to which I generally subscribe) has accomplished in the U.S. since 2000: Real median household income is down 2.2 percent, the prime-age labor-force participation rate is down by three percentage points, and the population-adjusted rate of deaths by drug overdose is up more than two-and-a-half times.
After that dismal a performance, it actually shouldn’t be all that surprising that a new administration would want to emphasize a different approach that’s concerned less with how to grow the economic pie and more with how to divide it. What is surprising, and still confounding to many observers, is that this shift is being driven by a Republican president. My Bloomberg View colleague Tyler Cowen described what he called “Trumponomics” as “a new approach to the redistribution of wealth, working through jobs and regions rather than income transfers.” He also doesn’t think it will work, although he isn’t certain it won’t. If it doesn’t, don’t be too sure that the zero-sum pie-shrinkers will go away -- although next time they may try to raise your taxes or bust up your monopoly.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Secretary of State Rex Tillerson, Treasury Secretary designate Steve Mnuchin, Transportation Secretary Elaine Chao and National Economic Council chief Gary Cohn all spring to mind.
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