Trumponomics or Trumpitis

 

Trumponomics or Trumpitis

An editorial page opinion piece that sounded like a Delphic Oracle appeared in the newspaper a month or so ago and I had made a mental note to offer my commentary on it, if only to myself. As I am getting into this activity after a self-imposed exile of about eight months, today is as appropriate a time as any for me to vent. Yes, this is not going to be a slimy, slithery, oily stuff; at least I am hoping it would be rather weighty, but only to the extent that the weakling that I am can lift.

It was, to set the stage, a harmful time for everyone except Donald J. Trump who had just enthroned himself as the king of the USA and his minions, all of them multi-millionaires and one who was then the richest man in the world. After that period none can argue that the US is a democracy. It could be called an oligarchy, authoritarianism, monarchy, madhouse, whatever else but not a democracy.

The management biggie’s piece carried a debate-inviting heading that blared that the arguments for what Trump was doing were not to be scoffed at. I will scoff at a few that I spotted as items to be scoffed at.

Can America not survive without manufacturing jobs? Manufacturing is second to services industry, and in the US, it contributes no more than 25% of what the services sector does to the country’s GDP. So, why the clamour for manufacturing? What exactly has happened now, quite precipitously, that Trump’s mind gyrates uncontrollably, like tariffs of 50%, 26%, 10%, 125% and 145% for China? Nothing. He wants people to see that he is doing something, anything, and that he is not asleep at the wheel, while the world makes his head spin. Do we need to listen to him?

Everybody who is anybody advises India that it should join the services bandwagon. Go up the value-chain, India! India did, and fortunately timely help came from the Y2K scare (do you care to remember that?). Services industry, in any form, does not produce zillions of hours of employment, nowhere near as it does to returns on investments (RoI). India’s turn towards services also produced wealth–for a few–leaving out many. This was named “jobless growth” and the Gini Index shot up. All that was in the past, but it continues to be in the present too.

Hence, Trumponomics, to focus on manufacturing, which is more like a disease, Trumpitis.

Trump is supposed to have said, “If you don’t have steel, you don’t have a country”. Yes and no. You can have a country and not have steel to the extent you need. Let us look at India. Its per capita steel consumption is 77.2 kg, and its production is 100 kg. Aha! We can have a country and we do, that is India! All round applause, please.

The noise subsided. The global average for steel consumption is 233 kg. India is good on the consumption/production ratio (less than 1.0), but fails miserably in the global consumption average. Consumption of steel is an indicator of where a country is on the development curve. India is low down, somewhere near River Styx. So, the comparison is nowhere near celebratory! Trump is less than a half-baked cake and those who quote him are, choose one from the list: idiots, morons, backwards.

“...free trade is not necessarily fair trade.” If the trade is not “fair”, the country will be taken to the cleaners. The US sells soybeans to China and buys iPhones (whose profit, at least part of it, is accounted in Apple’s operations in China, Taiwan, in the US and India too; some of it is accounted for in Ireland who can send only potatoes!) and toys (that makes a significant portion of Christmas sales, from China. This is all a bit confusing to me, and more so for Trump, it appears.  Trump does not seem to have heard about comparative advantage. You do what you do best and leave the rest to others.

The US has comparative advantages in many items of trade. One can lose such an advantage in one and gain in others.  Ironically, Trump had one comparative advantage when he became the US President the first time around. The Trump Hotel in Washington D.C. was right round the corner from the White House. He milked it. Did and doing the same with Mar-a-Lago. Per the article, we should pay attention to this serial law-breaking. I call it Trumpitis. No wonder Trump is against any regulation. This suits Elon Musk also, who is leading Trump by the nose rope.

The writer has not heard, it appears, prevention is better than cure. Prevent corruption of the rich and the richest now or suffer later.

“Nations park much of their foreign exchange reserves in U.S. government securities.” This is good for the US. Then, China seemed to take stuttering steps towards making its currency Yuan another reserve currency. When Trump came to hear of it, he went nuclear. Why? The reason is not far to seek, as investor sold US T-Bills, their yield increased (the interest the investor is assured at maturity). This is bad for the US; it cannot finance its accumulated debt as on date. This debt cannot even be dented by any level of austerity over even a couple of decades, whereas Trump has but four years (the talk of his running for a third term is all just that, talk). The writer conveniently skipped this basic understanding of global economics.

The economist John Kenneth Galbraith argued against something that the writer wrote, “Tariffs will raise the cost of imports, ... reducing the trade deficit ...will spur domestic manufacturing”. The idiom goes, “One cannot push with a string!” Demand can hardly be managed through cuts in interest rates. I do not know whether the writer believes in the above, but his argument calls for pushing with a string!

The writer also agrees with Ayn Randian way of thinking: the economy is best left to the market, no regulations. Elon Musk could not agree more. His DOGE was doing just that, gutting and ravaging every regulatory institution, with Trump’s blessing.

I am going to stop here. What bothered me most about the article was the negatives of what the writer promoted were not even acknowledged. Intellectual dishonesty from the citadel on the mountain top.

Raghuram Ekambaram