Friday, March 9, 2018

Cronyism set to reach new heights.

George W. Bush was often thought of as epitomizing crony capitalism.  But Donald J. Trump carries cronyism to a new height.  Not only is Trump himself and family (Ivanka, Jared et al.) using their positions for personal gain, he has made appointments to cabinet positions of people friendly (if not an actual part of) the industries they are supposed to regulate.  

Thus we have the Environmental Protection Agency run on behalf of polluters, an Interior Department run by people who want to loot federal land, an Education Department run by the for-profit schools industry.

And now he is making trade policy which will benefit those who have the ear (and pockets) of people in power.   As Paul Krugman writes:

“There’s a reason we have international trade agreements, and it’s not to protect us from unfair practices by other countries. The real goal, instead, is to protect us from ourselves: to limit the special-interest politics and outright corruption that used to reign in trade policy”.   

Krugman points out that there usually are many more people hurt by tariffs than by those who benefit.  But those who benefit have the ear of the policy makers. It is interesting that steel (along with aluminum) are the first products subject to import duties.  I heard former Reagan Budget Director, David Stockman, on the radio yesterday saying that the steel industry has been a major crybaby for years, perennially trying to get Government help for the industry.

Before WWII, “Tariff policy used to be one of the dirtiest, most corrupt aspects of politics both in the U.S. and elsewhere” (Krugman).

Following the repeal of the Smoot-Hawley Tariff Act, under FDR, temptations for these crony special deals vanished.  But cronyism is one of the defining characteristics of Donald Trump.  It’s not surprising that he’s moving to impose tariffs.

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