Economy & Budget

Influencing one business is not sound pro-business policy

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From the looks of things, most Americans support Ford’s decision on Tuesday to keep more of its manufacturing in Detroit. Americans need jobs, especially Detroit residents.

That conventional wisdom seems so perfectly right and obvious that it can be difficult to imagine any objections to what transpired. 

In fact, Trump supporters and others in the “buy American” crowd have preemptively dismissed the next round of pointy-nose punditry from the disconnected elites. They think that only those who lack sympathy for American workers would have any criticisms here.

{mosads}If only everything were so simple.

A decade ago, I was part of the Michigan exodus — a post-recession period in which many left the state to find jobs elsewhere. Today, I live in West Virginia — Trump country — where I know many fine people who hold a variety of political views.

No one in this national conversation lacks sympathy for American workers; we only disagree on how to best elicit a robust economy that will provide worthwhile jobs. 

A few weeks ago, I argued that President-elect Trump had set a bad precedent by making personal a deal with Carrier Corp. I suggested that a president should set consistent economic policy for the nation, but steer clear from deal-making, because it opened up a host of ethical issues about fairness and consistency.  

Now, Trump is getting at least partial credit for another kind of business deal. To the extent that Ford’s decision to stay in the U.S. was brought about by confidence in Trump’s general economic promises, that is fine. 

If Trump is successful in reducing corporate taxes or loosening the regulatory grip on American businesses, our business environment will become more competitive. Jobs will flow back to the United States as a matter of course.

Some manufacturing jobs ought to be in the U.S., at least for as long as the work is profitable here. But, tied up in this whole affair seems to be a confusion between policies that benefit a business, and policies that are pro-business in general.

The result is a mistaken attraction toward policies with benefits that are immediate and obvious verses those that are delayed and diffuse.  

Arguably, Trump knows how to run a business, but that doesn’t necessarily mean he knows what is best for business in general. The kinds of policies that Trump is pushing would make complete sense if the U.S. were a single business trying to crowd out others from a consumer marketplace.

What we have seen are the kinds of policies that the leader of a large established corporation would like to see put in place for the success of his own business. A market economy does not function like a single corporation, however.

A corporation profits when its revenues are greater than its expenses. A healthy economy, on the other hand, is not determined by its import-export ratio, but by its size and efficiency, its ability to produce goods cheaply, and by the dynamism that enables people to open new businesses.

When we prevent foreign competition and trade, we shrink the marketplace by default. It is great that jobs are returning to Detroit, but what are the potential costs of protectionist policy?

If all we want is jobs, we can find plenty of them. We could give one man a job digging holes and another man the job of filling them back up again. 

With a quick deal with another manufacturer, Trump could make sure that jobs in any one particular field stay in the U.S. or return to the U.S. 

So, instead of focusing on auto manufacturing, why not a ban on chocolate from Mexico’s Nestle plants, or a “huge” tariff on Mexican bottles of Coca-Cola? 

Perhaps these things will come in due time. In fact, if Trump’s protectionist logic truly played itself out, we would not see bananas from Ecuador and coffee from Brazil.

We could grow these products ourselves. Without foreign competition in the market, we could employ thousands to construct greenhouses in Kansas, the new banana capital of America.

We could plant rows of coffee trees in the Everglades. We might consider blocking other things that negatively affect American businesses.

Like the satire from the French economist Frederic Bastiat, we could block out the sun to protect our American candlestick makers and light bulb producers.

If this latest bout of anti-trade Twitter rage is any indication, I predict that, as Trump’s presidency gets going, he will become increasingly angered at smaller and smaller examples of free trade. 


Michael Douma is the director of Georgetown University’s Institute for the Study of Markets and Ethics. Douma earned a Ph.D. in history from Florida State University.


The views expressed by contributors are their own and not the views of The Hill. 

Tags Donald Trump economy Free trade Free trade agreements NAFTA's effect on United States employment Protectionism Trade policy
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