Back in 2009, I wrote a book titled “Distrust, American Style,” in which I explored the role of trust in government and civil society. My research for that book involved dipping into the considerable scholarship on the subject, and confirmed the immense importance of trustworthy behavior by both governments and the various elements of our society. I traced the negative effects of then-emerging examples of untrustworthy behaviors–by businesses like Enron, by a variety of sports figures, and by religious figures. (Catholic Church scandals were in the news daily.)
I did not, however, turn my attention to the importance of trust to national economic performance. Paul Krugman has recently filled that void, explaining the likely, significantly negative consequences of having a madman and would-be king occupying the Oval Office.
Krugman began by focusing on the stupidity of the law firms that “bent the knee” to our mad king–pointing out what should have been blatantly obvious (and raising doubts about the intellectual and analytic bona fides of the fat-cat partners who cowered before Trump’s patently illegal threats.)
Less than a month ago many of America’s biggest law firms made deals with the White House in which they promised to end diversity, equity and inclusion (DEI) practices and to devote substantial resources to pro bono work on causes the administration supports. It was a shameful capitulation.
It was also stupid. Anyone who looked either at Donald Trump’s personal history or the history of authoritarian regimes in general would have realized that there’s no such thing as a deal with this administration. Whatever you think Trump and co. have agreed to, they will feel entirely free to make new demands whenever it suits them.
Those firms should have known that giving in to Trump just signals weakness, which leads him to demand further concessions.
Then Krugman explains why Trump’s mercurial behaviors are such a threat to the American economy. U.S. efforts to build an anti-China trade alliance are doomed to failure, Krugman says, “Because nobody with any sense trusts the Trump administration to honor the terms of any deals it makes, whether they’re deals about pro bono work with law firms or tariff deals with other governments.”
And as more and more people realize that Trump and his minions can’t be trusted, the damage will spread from trade to finance. The international role of the dollar and, eventually, America’s ability to service its debt are very much at risk.
Why can’t Donald Trump be trusted? Partly because he’s Donald Trump. But even if he weren’t, absolute monarchs — which is what Trump is trying to become — are fundamentally untrustworthy. The ruler may sometimes choose to honor his promises, but it’s always his choice — a choice that can be changed at any moment. And his untrammeled power makes the nation he rules weaker, not stronger.
Krugman uses historical examples to buttress his central argument that reliance upon a nation’s commitment to the rule of law–a commitment that promises stability–is central to economic growth and prosperity. And as he says, Trump will be unable to make trade deals because nobody trusts his promises.
The international role of the dollar depends in significant part on the belief that the U.S. government can be trusted to behave responsibly. “Among other things, international investors normally assume that the president will respect the independence of the Federal Reserve and refrain from, say, arbitrarily rewriting the terms of federal debt.”
Krugman ends his economics lesson by writing that, “Even now, I don’t think businesses, investors and the public in general fully appreciate what it means that we’re all subject to the whims of a mad king. But they’ll learn.’
Actually, there are indications that the more sophisticated investors and businesspeople are beginning to understand the enormous consequences of installing this madman in office, and of surrounding him with sycophants and clowns unable to restrain his incoherence.
But I’m quite sure Krugman is correct when he says that the public in general doesn’t “get it.”
A couple of days ago, I quoted Frederich Hayek for his analysis of the conditions giving rise to the emergence of “the worst.” They were 1) a dumbed down populace, 2) a gullible electorate, and 3) scapegoats on which that demagogue can focus public enmity and anger. MAGA voters have proved Hayek prescient. Millions of Americans lack even rudimentary civic and economic literacy, and have been kept gullible by media outlets that tell them what they want to hear.
And as a recent Facebook meme has it, “This is all so unfair to people who were just voting their racism.”
Sic transit America…
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