Commentary — March 2, 2017, 11:53 am

Dealmaker in Chief

Trump’s economic authoritarianism

On January 5th, Donald Trump, then the president elect of the United States, aimed an incriminating tweet at one of the world’s largest car manufacturers. “Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S.,” he wrote, likely on his unsecured five-year-old Android phone. “NO WAY! Build plant in U.S. or pay big border tax.” It was an odd threat; the new plant was in Guanajuato, not Baja, and it shifted jobs from Canada, not the United States. Nevertheless, the company signaled conciliation. “Toyota looks forward to collaborating with the Trump administration,” it announced as its share price plunged.

Since winning the presidential election in November, Trump has targeted more than a dozen companies with his one-hundred-forty-character broadsides, sending public-relations departments into overdrive and even prompting some tech firms to hire employees to monitor @RealDonaldTrump in the wee hours of the morning. When the president jawbones Boeing for a cheaper Air Force One or prods Chevrolet to move jobs back from Mexico, he claims to be strong-arming companies while boosting the economy as a whole—forcing executives to sacrifice profits for the sake of the American worker. Chief executives from companies like Ford and Sprint have struck a tone of civic duty, pledging to do their part to fulfill Trump’s economic promises, even if it will hurt the bottom line. But history suggests the opposite is true: corporations that strike deals with Trump stand to benefit at the expense of everyone else.

Throughout his campaign, Trump criticized the U.S. government for making “bad deals.” To him, the Trans-Pacific Partnership, NAFTA, the Iran nuclear deal, and the Paris climate agreement are all examples of inept negotiations carried out by career politicians in Washington. “I do deals. It’s what I do,” he told a crowd of supporters in October, pledging to fight for working-class Americans. Of course, the executive who builds a new plant in the Rust Belt expects something in return. When the manufacturer Carrier agreed in November to keep seven hundred and thirty jobs that had originally been slated to move to Mexico, the company won tax incentives and a vague promise of lighter regulations. Carrier’s tax break, $7 million over a decade, didn’t come close to recompensing the company for the $65 million it had hoped to save by sending jobs to Mexico. But other incentives were at play. Carrier’s parent company, United Technologies, can now rest assured that its government contracts, worth more than $5 billion a year, are safe from Trump’s whims. And though political goodwill can’t be tabulated on a balance sheet, Carrier’s executives can count themselves on the right side of Trump’s ledger of friends and enemies. “I was born at night but not last night,” United CEO Greg Hayes said after the deal. “I also know that about 10 percent of our revenue comes from the U.S. government.”

History has shown that direct interventions like these tend to produce corruption without broader economic gains. Researchers who study authoritarian regimes, where such tactics are common, say that targeting individual companies causes industries to focus less on innovating and more on currying favor. Pleasing the president becomes the fastest path to profits, and businesses race to take advantage. One study that looked at forty-eight countries over a period of thirty-five years, from 1950 to 1985, found that corporate profits tend to rise during a shift to autocracy. CIA-backed coups toppling foreign leaders throughout the mid-twentieth century provide the most dramatic examples of this phenomenon. For instance, after the 1973 coup that installed Augusto Pinochet as ruler of Chile, the country’s two major banking conglomerates, nicknamed “the piranhas” by international investors, grew at an unprecedented clip. As Pinochet enacted sweeping market reforms, the holding companies Vial and Cruzat-Larrain rapidly consolidated their grip on Chilean business, together controlling fully half of the total assets on Chile’s public stock exchange by 1978. It didn’t hurt that the two conglomerates maintained close ties with functionaries in Chile’s central bank and budget office. Meanwhile, the economy as a whole crumbled: As corporate profits boomed, inequality spiked and average wages fell, not to return to their 1970 levels until 1992.

For decades, presidents have largely respected what post-war business leaders called the “right to manage,” letting individual companies operate without direct interference. America’s last dealmaker in chief was Richard Nixon, who, like Trump, pursued an unabashedly transactional mode of politics where economic outcomes were subordinate to political ambitions. In May 1971, for example, Nixon found himself in need of funds for his upcoming re-election campaign. One of his targets was the International Telephone and Telegraph Corporation (I.T.T.), which was seeking to merge with Hartford Fire Insurance in what would be the largest corporate tie-up in memory. “Does I.T.T. have money?” Chief of Staff H. R. Haldeman can be heard asking on Nixon’s secret tapes. “Oh God yes,” Nixon replied. “That’s part of this ball game.”

The I.T.T.-Hartford merger had already been flagged by Nixon’s justice department, which opposed the deal on the grounds that it would increase market concentration and allow I.T.T. to give its subsidiaries favorable insurance rates at the expense of consumers. But Nixon said he would force the department to drop its antitrust action if the company paid up. He told his aides to “cut a deal” with I.T.T. and leaned hard on Richard McLaren, a meddlesome antitrust regulator, to allow the merger. “If it’s not understood, McClaren’s ass is to be out of there within one hour,” Nixon said. “The I.T.T. thing—stay the hell out of it.” Two months later, the merger went ahead as I.T.T. quietly pledged $400,000 to the 1972 Republican National Convention.

After Nixon was impeached, Congress enacted a raft of rules to prevent Nixon-style horsetrading, including disclosure requirements that opened government meetings to the public. Corporate America, ever agile, responded by building a subtler system of cocktail hours, revolving-door hires, and the soft corruption of limitless political spending. Lobbyists regularly wine and dine congressional aides, who return the favor by running industry-friendly legislation up the flagpole. Successive rollbacks of political spending limits, Citizen’s United being the most famous, have allowed corporate interests to fund massive communications efforts pushing their agendas. That system has been effective at giving business a huge advantage. Researchers recently found, for instance, that Americans pay about twice what Germans do for cell-phone service because our telecommunications firms wield such extensive market power and political connections.

Many economists worry that Trump could preside over a fundamental realignment of government-business relations and usher in an era of naked corruption. Matthew Mitchell of the Mercatus Center explained that when leaders direct punishment toward selective companies, “You’re really just inviting firms to ingratiate themselves to policy makers.” Take antitrust regulation, an area of policy where candidate Trump made occasional anti-monopoly rumblings. So far, Trump has only expressed concern over monopolies that involve his political enemies. He has condemned Amazon, whose chief executive Jeff Bezos owns the Washington Post, and opposed the merger of AT&T and Time Warner, which owns the cable-news network CNN. Analysts have mused that Trump may make the deal contingent on Time Warner dropping CNN.

The message is clear: show loyalty to Trump and reap the rewards. That may explain why markets have stayed strong even while the media gives Trump credit for “bodyslamming big companies,” as one Post columnist put it. Corporations know that the president’s demands are publicity stunts that will be accompanied by tax cuts, deregulation, and direct access to the levers of government. Wall Street has tried to persuade the public that those policies will accelerate economic growth. But a University of Chicago survey of prominent academics found that while 62 percent agreed that Trump’s policies would increase corporate profits, only 16 percent predicted quicker economic growth that would benefit the average American. Daron Acemoglu, an economic historian at MIT who took part in the survey, condensed his thoughts into a tweet-length summary: “[Trump’s plans],” he wrote, “are much more likely to be disastrous for the economy.”

Help support our ongoing coverage of Donald Trump by subscribing to Harper’s Magazine today!

Share
Single Page

Get access to 169 years of
Harper’s for only $23.99

United States Canada

CATEGORIES

THE CURRENT ISSUE

March 2020

The Old Normal

= Subscribers only.
Sign in here.
Subscribe here.

Out of Africa

= Subscribers only.
Sign in here.
Subscribe here.

Waiting for the End of the World

= Subscribers only.
Sign in here.
Subscribe here.

In Harm’s Way

= Subscribers only.
Sign in here.
Subscribe here.

The Fifth Step

= Subscribers only.
Sign in here.
Subscribe here.

A View to a Krill

= Subscribers only.
Sign in here.
Subscribe here.

view Table Content

FEATURED ON HARPERS.ORG

Article
The Old Normal·

= Subscribers only.
Sign in here.
Subscribe here.

Addressing the graduating cadets at West Point in May 1942, General George C. Marshall, then the Army chief of staff, reduced the nation’s purpose in the global war it had recently joined to a single emphatic sentence. “We are determined,” he remarked, “that before the sun sets on this terrible struggle, our flag will be recognized throughout the world as a symbol of freedom on the one hand and of overwhelming force on the other.”

At the time Marshall spoke, mere months after the Japanese attack on Pearl Harbor, U.S. forces had sustained a string of painful setbacks and had yet to win a major battle. Eventual victory over Japan and Germany seemed anything but assured. Yet Marshall was already looking beyond the immediate challenges to define what that victory, when ultimately— and, in his view, inevitably—achieved, was going to signify.

This second world war of the twentieth century, Marshall understood, was going to be immense and immensely destructive. But if vast in scope, it would be limited in duration. The sun would set; the war would end. Today no such expectation exists. Marshall’s successors have come to view armed conflict as an open-ended proposition. The alarming turn in U.S.–Iranian relations is another reminder that war has become normal for the United States.

Article
More Than a Data Dump·

= Subscribers only.
Sign in here.
Subscribe here.

Last fall, a court filing in the Eastern District of Virginia inadvertently suggested that the Justice Department had indicted WikiLeaks founder Julian Assange. The Wall Street Journal, the New York Times, and other outlets reported soon after that Assange had likely been secretly indicted for conspiring with his sources to publish classified government material and hacked documents belonging to the Democratic National Committee, among other things.

Article
The Fifth Step·

= Subscribers only.
Sign in here.
Subscribe here.

Harold Jamieson, once chief engineer of New York City’s sanitation department, enjoyed retirement. He knew from his small circle of friends that some didn’t, so he considered himself lucky. He had an acre of garden in Queens that he shared with several like-minded horticulturists, he had discovered Netflix, and he was making inroads in the books he’d always meant to read. He still missed his wife—a victim of breast cancer five years previous—but aside from that persistent ache, his life was quite full. Before rising every morning, he reminded himself to enjoy the day. At sixty-eight, he liked to think he had a fair amount of road left, but there was no denying it had begun to narrow.

The best part of those days—assuming it wasn’t raining, snowing, or too cold—was the nine-block walk to Central Park after breakfast. Although he carried a cell phone and used an electronic tablet (had grown dependent on it, in fact), he still preferred the print version of the Times. In the park, he would settle on his favorite bench and spend an hour with it, reading the sections back to front, telling himself he was progressing from the sublime to the ridiculous.

Article
Out of Africa·

= Subscribers only.
Sign in here.
Subscribe here.

1. In 2014, Deepti Gurdasani, a genetic epidemiologist at the Wellcome Sanger Institute in England, coauthored a paper in Nature on human genetic variation in Africa, from which this image is taken. A recent study had found that DNA from people of European descent made up 96 percent of genetic samples worldwide, reflecting the historical tendency among scientists and doctors to view the male, European body as a global archetype. “There wasn’t very much data available from Africa at all,” Gurdasani told me. To help rectify the imbalance, her research team collected samples from eighteen African ethnolinguistic groups across the continent—such as the Kalenjin of Uganda and the Oromo of Ethiopia—most of whom had not previously been included in genomic research. They analyzed the data using an admixture algorithm, which visualizes the statistical genetic differences among groups by representing them as color clusters. The top chart shows genetic differences among the sampled African populations, in increasing degrees of granularity from top to bottom, and the bottom chart shows how they compare with ethnic groups in the rest of the world. The areas where the colors mix and overlap imply that groups commingled. The Yoruba, for instance, show remarkable homogeneity—their column is almost entirely green and purple—while the Kalenjin seem to have associated with many populations across the continent.

Article
In Harm’s Way·

= Subscribers only.
Sign in here.
Subscribe here.

Ten yards was the nearest we could get to the river. Any closer and the smell was too much to bear. The water was a milky gray color, as if mixed with ashes, and the passage of floating trash was ceaseless. Plastic bags and bottles, coffee lids, yogurt cups, flip-flops, and sodden stuffed animals drifted past, coated in yellow scum. Amid the old tires and mattresses dumped on the riverbank, mounds of rank green weeds gave refuge to birds and grasshoppers, which didn’t seem bothered by the fecal stench.

El Río de los Remedios, or the River of Remedies, runs through the city of Ecatepec, a densely populated satellite of Mexico City. Confined mostly to concrete channels, the river serves as the main drainage line for the vast monochrome barrios that surround the capital. That day, I was standing on a stretch of the canal just north of Ecatepec, with a twenty-three-year-old photographer named Reyna Leynez. Reyna was the one who’d told me about the place and what it represents. This ruined river, this open sewer, is said to be one of the largest mass graves in Mexico.

Cost of renting a giant panda from the Chinese government, per day:

$1,500

A recent earthquake in Chile was found to have shifted the city of Concepción ten feet to the west, shortened Earth’s days by 1.26 microseconds, and shifted the planet’s axis by nearly three inches.

An Iraqi man complaining on live television about the country’s health services died on air.

Subscribe to the Weekly Review newsletter. Don’t worry, we won’t sell your email address!

HARPER’S FINEST

Jesus Plus Nothing

= Subscribers only.
Sign in here.
Subscribe here.

By

At Ivanwald, men learn to be leaders by loving their leaders. “They’re so busy loving us,” a brother once explained to me, “but who’s loving them?” We were. The brothers each paid $400 per month for room and board, but we were also the caretakers of The Cedars, cleaning its gutters, mowing its lawns, whacking weeds and blowing leaves and sanding. And we were called to serve on Tuesday mornings, when The Cedars hosted a regular prayer breakfast typically presided over by Ed Meese, the former attorney general. Each week the breakfast brought together a rotating group of ambassadors, businessmen, and American politicians. Three of Ivanwald’s brothers also attended, wearing crisp shirts starched just for the occasion; one would sit at the table while the other two poured coffee. 

Subscribe Today