Monday, 17 February 2025

Henry Clay’s “American System” Was Bad News for the American Economy *Then*, and Will Be Again [updated]

 

GUEST POST

This bizarre protectionist manifesto (above) was posted and now appears to have been scrubbed from the Daily Caller's website. No wonder.

The author—a former Senior Policy Advisor to JD Vance in the Senate—has recently been appointed as Trump's "Special Assistant for Domestic Policy." An archived link of his article gives a glimpse of what this "Special Assistant" and his bosses believe. In short, as Phil Magness and James Harrigan explain in this guest post, it's outright Neo-LaRouchie lunacy rooted in the mercantilist economic doctrines of 19th century arch-protectionist Henry Clay—and "American System" whose modern rehabilitators conveniently leave out the fact that every time it was tried in the 19th and early 20th centuries, Clay’s program unleashed a torrent of preventable policy disasters.”

In other words, it's protectionist junk all the way down that will lift no-one anywhere ....

Henry Clay’s “American System” Was Bad News for the American Economy Then, and Will Be Again

by Phil Magness & James Harrigan

Some ideas are so bad we are doomed to relive them with each successive generation. Until recently, economic central planning from the political right received far less attention than its well-known manifestations on the left. Think of all the repeated attempts to rehabilitate Marxism and socialism, despite their disastrous track record over the last century. Unfortunately, an emerging faction on the political right has decided to deploy economic planning of their own as an intended countermeasure against their progressive foes. For inspiration, they’ve resurrected a failed and long-forgotten idea from the 19th century: Henry Clay’s “American System.”

Clay’s program was first articulated in an 1824 speech, in which he proposed using the Constitution’s tax and regulatory powers to execute America’s first national foray into centralised economic planning. His basic idea was to enlist the might of the federal government to strategically develop certain sectors of the American economy by subsidising them with tax dollars, and penalizing their foreign competitors with high protective tariffs.

Clay maintained that import tariffs could be used to give American manufacturers a leg up over European goods, while also cultivating “infant industries” that he deemed to be in the young nation’s strategic interests. Topping off the package, Clay proposed a spending spree on federally subsidised “internal improvements,” such as roads and canals to facilitate internal commerce, and a strong central bank to facilitate the financing of large government programs through the issuance of sovereign debt. In total, the program amounted to a comprehensive attempt at economic planning around the mistaken belief that trade is a zero-sum game, and countries were locked in a continuous struggle to maximise their industrial outputs by subsidising themselves and taxing their perceived foreign competitors.

If all of this sounds vaguely familiar, it should. It’s part of the protectionist-tariff playbook we witnessed during the Trump presidency. Or maybe it’s better seen, as William Galston asserts, as representing “an effort to bring some ideological coherence to the impulses Donald Trump represents—nationalism, isolationism, social conservatism, and hostility to immigration.” Indeed, Robert Lighthizer, the former Trump cabinet official who is considered the architect of his international trade policy, recently called for the adoption of a “New American System” based on Clay’s 1824 proposal at a speech in Washington, D.C. Henry Clay’s scheme similarly assumed centre stage at a National Conservatism Conference in Miami, Florida, when historian Michael Lind depicted him as the true successor to the American founding, by way of Alexander Hamilton. Clay’s ideas have also found an institutional home at the American Compass, a think tank set up by Oren Cass, Mitt Romney’s former economic advisor. 


It would be difficult to overstate the rapid pace at which Clay’s ideas have surged out of obscurity and into political discussions on the right. Barely two decades ago, discussions of it were almost entirely relegated to the peripheral fringes of American politics. Today, Secretary of State Marco Rubio invokes Clay as a model for constructing a US industrial policy to counter the economic rise of China.

The fundamental problem with this line of reasoning is that it rests on bad economic history, overlaid with the logical fallacy post hoc ergo propter hoc.

The “new American System” advocates tell a version of US economic history that goes something like this: 
  • In the early 19th century, the United States entered the world scene as an economic backwater facing insurmountable competition from the established industrial nations of Europe, and particularly Great Britain. 
  • By the turn of the twentieth century, the United States had emerged as one of the world’s great industrial powers, even surpassing the Old World despite getting a later start. 
  • The credit for this growth, they claim, goes to the “American System” policies that Clay championed: high protective tariffs, subsidized “internal improvements,” the gradual expansion of a powerful central bank, and all around economic planning.
Even the basic claims of this story are in error. however. As economist Douglas Irwin has shown, proponents of the theory that tariffs drove American economic growth “have tended to present statistics that overstate late nineteenth century US growth in comparison to other periods and countries.” After examining the empirical evidence, Irwin concludes, 
It is difficult to attribute much of a positive role for the tariff because import tariffs probably raised the price of imported capital goods, thereby discouraging capital accumulation.
He accordingly rules out the theory that trade protection, the main plank of Clay’s platform, caused the United States to become a world economic power.

But there are even-more-fundamental problems with the new “American System” theorists’ history. They get basic facts wrong about the nature of 19th century economic policy, while simultaneously obscuring or ignoring the many downsides of Clay’s program and its attempted implementation.

The Rise and Demise of the American System


Though once a popular political slogan, Clay’s American System fell into disrepute after a series of discrediting blows in the 19th and early 20th centuries. The first came in 1832, when President Andrew Jackson vetoed legislation to recharter the United States’ corruption-plagued central bank. The creation of the Federal Reserve in 1913 resuscitated this legacy, along with its tendency to engage in political manipulation of monetary policy, though the Bank War did manage to constrain the push for centralisation on that front for much of the 19th century.

Clay’s original tariff program endured a bit longer, finding legislative support at various points between 1824 and 1930. As the chart below shows, however, the 19th century was not an uninterrupted experiment in Clay-style protectionism. Clay only briefly got his way when a series of tariff measures between 1824 and 1828 jacked the average rate on dutiable goods to over 60 percent. The “Tariff of Abominations,” as the 1828 measure came to be known, sparked a political crisis that brought the country to the brink of disunion, after South Carolina attempted to nullify the high tax measure. As the graph shows, from 1833 until the Civil War, the United States charted a course of tariff liberalization, save for a brief interruption when Clay’s Whig Party attained power in 1842. In fact, in 1846 US Treasury Secretary Robert Walker orchestrated a major tariff liberalization to coincide with Great Britain’s famous repeal of the protectionist Corn Laws that same year.

The United States did not reimpose high tariffs in the Clay model with any degree of permanence until the second half of the nineteenth century. While this period did coincide with economic growth, the claim of a causal relationship ignores the fact that the American economic ascendance was already well underway, preceding those tariffs by several decades, and getting its start in a time of relative trade liberalisation on both sides of the Atlantic.



One of the main reasons Henry Clay struggled to get his American System launched in his own lifetime (1777-1852) was the political corruption it always attracted. In practice, the American System’s rationalization of trade protectionism provided cover for rampant graft and favoritism. From the moment of its inception, politically connected special interests seized control of federal tariff legislation and reshaped it to their own benefit. They lobbied for punitive tax rates on their competitors and pork-laden handouts for themselves, even if it meant overtaxing commerce at the expense of revenue itself. At several points in the 19th century, protectionist tariffs pushed the US tax system into the upper half of the Laffer Curve, where rates became so onerous that they undermined the intake of federal tax revenue. This was by design, as protectionist tariffs use taxes as a weapon to deter foreign goods from even entering the country.

The American System and Slavery


Clay’s American System also struggled to disentangle its doctrines from the institution of slavery. Its underlying theory held that the American economy could be “harmonised” and internally integrated through national economic planning. That meant deploying “internal improvements” and the tariff schedule to bind northern industry and southern agriculture together in economic symbiosis. Clay’s doctrines amounted to an early experiment in import substitution: the strategy of using tariffs and other commercial restrictions to divert raw-material production away from international markets and into a heavily subsidised domestic industry. In practice, this meant intentionally shifting southern cotton production away from transatlantic markets and into the textile mills of New England. In order for the American System to function as intended, it would have to subsidise plantation agriculture as well as northern industry.

Some of the American System’s proponents, including Clay himself, eventually recognized that a full “harmonisation” of the US economy under the American System would entail significant public expenditures to develop southern agriculture, thereby politically entrenching slavery in perpetuity. Clay (who, despite being a slave-owner, had reservations about the institution) therefore devised what is often referred to as the “Whig formula” for addressing slavery through a scheme of federally compensated gradual emancipation.

To facilitate this program, Clay appended the American System doctrine with another plank. In addition to paying for “internal improvements,” federal land sale revenue would be allocated to “colonise” or resettle the African-American population of the United States in faraway tropical locations such as Liberia or Central America. As Clay explained in an 1847 speech, federally subsidised colonisation “obviated one of the greatest objections which was made to gradual emancipation,” that being the “continuance of the emancipated slaves among us.” Following Clay, American System theorists such as economists Mathew Carey and his son Henry C. Carey began to champion the black colonisation movement as a “solution” to the problems that slavery presented to their tariff and subsidy scheme. In order to make the system work without plantation slavery, they would simply export the freed slaves abroad.

Aside from a few experiments such as the founding of Liberia, such schemes proved impractical, and eventually succumbed to political obstacles during the American Civil War. Clay’s tariff system nonetheless gained a foothold on the eve of the war, as protectionist interests exploited the chaotic “secession winter” legislative session of 1860-61 to cram the pork-laden Morrill Tariff Act through Congress—dramatically hiking tariffs from (declining) average rate of below twenty percent, to a suffocating imposition of almost fifty percent!

A Civil War Diplomatic Disaster


Although the 1861Morrill Tariff succeeded in finally installing an American-System-style tariff regime for the next half-century, it quickly turned into a diplomatic disaster. The new law’s steep protectionist rates alienated the British government, which would otherwise have been a natural anti-slavery ally to the Union cause. At the outbreak of the war, British abolitionist and free-trader Richard Cobden wrote his friend Charles Sumner, the US Senator from Massachusetts, to plead the importance of free trade to the anti-slavery cause. “In your case we observe a mighty quarrel: on one side protectionists, on the other slave-owners.” Citing the Morrill Tariff supporters’ publicly expressed reluctance to move against slavery, Cobden predicted the measure would imperil his efforts to steer Britain to the aid of the North. As he rhetorically asked his fellow abolitionist Sumner, “Need you wonder at the confusion in John Bull’s poor head?”

As part of the fallout, the Lincoln administration entered the White House facing an irate diplomatic landscape. In part alienated by the tariff, Britain adopted a stance of neutrality toward the two American belligerents. After successive missteps further soured the Lincoln Administration’s relationship with London, abolitionists such as Cobden had to mobilise opinion on the British homefront against the Confederacy by reminding people of slavery’s central role in the war. The diplomatic row, which began with an ill-conceived and opportunistic tariff bill on the eve of Lincoln’s inauguration, would plague US-UK relations for decades to come. Its wartime effect thrust the incoming administration into a needlessly hostile diplomatic situation, handicapping the Union’s war efforts from abroad.

As a domestic economic policy, the Morrill Tariff served a slew of special interests in the northeast by placing punitive taxes on their competitors. It did not finance the Union war effort (as is often incorrectly claimed by American System enthusiasts) as it was never intended for the purpose of raising revenue. The Morrill Tariff primarily aimed to deter commerce from abroad at the behest of domestic manufacturing, allowing them to capture increased prices on their own goods. As a war measure, it amounted to a self-inflicted wound by alienating Britain from the Union’s cause.

How Clay’s Tariffs Gave Us the Income Tax


After the Civil War, the tariff issue came to dominate American economic policy. Until 1909, the successors to Clay’s “American System” generally enjoyed the upper hand. That year, President William Howard Taft called for a routine revision to the federal tariff schedule that quickly devolved into a corrupt free-for-all of tariff favoritism and special-interest handouts.

Amidst the backlash against the Payne-Aldrich Tariff Act’s special-interest free-for-all, a coalition of free trade Democrats and breakaway Republican “insurgents” in the US Senate turned to a radical solution. Realising that they would never break the monied interests of the protectionist lobby, they proposed restructuring the entire federal tax system by shifting it away from the corruption-prone tariff schedule. The result was the 16th Amendment, a flanking move that tried to substitute the protective tariff system with the federal income tax. The amendment, one legislator boasted at the time, would serve as a “club to beat down the tariff” by separating the federal tax system from the entrenched protectionist lobby.

For a fleeting moment, the strategy worked. In 1913, Congress cut import tariffs to their lowest point since the 1850s, and imposed a modest income tax to make up for the loss of revenue. The special-interest groups quickly reconstituted though, and in 1922 they succeeded in exploiting an economic downturn in the agriculture sector to make the case for renewed protectionism. Since the income tax already provided the lion’s share of tax revenue, lawmakers no longer had to worry themselves about jacking up tariff rates to prohibitive levels. As a result of this post-World War I resurrection of Clay’s “American System,” the United States ended up with the worst of both worlds: high tariffs to raise the prices on imported goods at the behest of their domestic competitors, and a new federal income tax to extract revenue from them at every opportunity.

When Americans complete their income tax filings today, few realise that the interminable frustrations of this annual ritual have their origins in a now-obscure tariff bill. It was the corrupt overreach of Clay’s “American System,” though, that ultimately bequeathed us with the modern IRS.

Smoot-Hawley and the Collapse of Clay’s Doctrine

The legislative progeny of Henry Clay’s doctrines finally came to a catastrophic head in 1930 when Congress enacted the Smoot-Hawley Tariff. The measure passed in a desperate attempt to shield special interests from the 1929 stock market crash, although its legislative origin predated “Black Monday” – October 28, 1929 – by several months. The congressional record shows that Smoot-Hawley took its direct inspiration from Clay’s doctrines. The debate on the bill commenced in the House of Representatives earlier that May. Making the case for the protectionist side, Rep. Hamilton Fish (R-NY) declared that “the Republican Party has just one viewpoint, and that is to protect American labour and American industry, not through a competitive tariff but through a tariff that actually protects.” To reinforce his point, Fish quoted “a brief extract from a speech of Henry Clay in favor of a protective tariff…which has never been improved on and has constituted the Republican tariff doctrine for the past 70 years.” After quoting Clay’s American System speech from 1824, Fish offered his rationale for adopting a renewed protectionist policy in 1929. It reads like a talking point from Oren Cass’s American Compass today:
The prosperity of this Nation [claimed Fish] has been built up because the Republican Party has hewed to the line to protect American labor and American industry and to conserve the home markets from ruinous competition with the low-paid labour in foreign countries.;
In a prescient response, another representative challenged Fish by warning that a tariff hike could lead to economic turmoil, including triggering a harmful turn in already-uneasy unemployment numbers. If the tariff passed, was Fish ready to take “credit for the general condition of unemployment that now exists in the United States?” After dissembling over particular, contested tariff rates and the need to serve a multitude of special interest constituencies, Fish reiterated the philosophical justification for pushing ahead. He again invoked Henry Clay’s American System:
That principle was laid down by Henry Clay—the principle of protecting the home market. It is just the reverse of the English attitude. They export 90 percent and only absorb 10 percent of their products in their own home market: We consume in this country 90 percent of our home product and export 10 percent. The question is simply whether you prefer to conserve the home market and protect American wage earners or let the products of low-paid foreign labour destroy the home market for the American producer.
The stock market crash in October poured gasoline onto an already-burning fire as the Smoot-Hawley bill progressed through Congress. The pork-barrel free-for-all saw money changing hands between lobbyists and legislators on the floor of the committee rooms, as industry after industry attempted to purchase “protection” for itself from the unfolding economic recession. They thought they were weathering the storm by obtaining legislative favors. Instead, the cumulative hikes of Smoot-Hawley boosted tariff rates to a historic high of almost 60 percent on all dutiable goods entering the United States. The measure provoked a wave of retaliatory protectionism across the world. In just four short years, Smoot-Hawley had inadvertently triggered a global collapse in international commerce.

The effects may be seen in the famous “spiral” graph published by the League of Nations’ World Economic Survey in 1933. By pursuing the course advised under the “American System” doctrine, the United States directly helped to put the “Great” in “Great Depression.”


Repeating Old Mistakes

The National Conservative argument for the “American System” correctly observes that there were moments in United States history when the country largely adhered to Henry Clay’s suite of high protectionist tariffs, public works projects, and allegedly "strategic" industrial subsidies. They also choose to deemphasise, or may even remain ignorant of, the American System’s more ignominious legacies. You will seldom encounter, for example, a NatCon who seriously engages with the moral conundrum that slavery created for Clay’s import-substitution scheme before the Civil War. The American System’s colonisation plank is almost entirely absent from these discussions, and its propensity for attracting graft and corruption in its later iterations is almost always swept under the rug.

Instead, the version they present is an idealised form of seamlessly executed economic planning, albeit for “strategic” purposes in the “national interest” instead of the left’s usual litany of social justice causes. The inherent coordination problems of centralised economic planning do not simply melt away when it is directed at nationalist objectives instead of progressive, redistributive goals.

But there’s an even-more-fundamental problem with the American System narrative. Its modern rehabilitators conveniently leave out the fact that every time it was tried in the 19th and early 20th centuries, Clay’s program unleashed a torrent of preventable policy disasters.

In 1828, a protective tariff pushed the country to the brink of disunion while also demonstrating Clay’s own inability to extricate his program from the slave economy. In 1861, Clay’s economic philosophy triggered a diplomatic crisis with Britain that unwittingly alienated an anti-slavery ally from the Union cause. In 1909, the heirs of Clay’s economics became so thoroughly beholden to the corrupt dealings of the tariff lobby that a section of their own party revolted and ushered in the haphazardly designed federal income tax system that plagues us to this day. And in 1930, Clay’s political progeny steered the country directly into economic ruin by embracing an American-System-inspired tariff program as its main countermeasure to the unfolding Great Depression. While Clay’s latter-day advocates jump at every opportunity to credit him for late-19th-century American economic growth despite a weak empirical basis for the claim, they also conveniently omit the track record of real and tangible blunders that followed from a century of experiments in American System economic policy.

In the case of the Clay-inspired Smoot-Hawley Tariff, the resulting collapse in international trade proved so disastrous that it largely expunged the American System’s advocates from both political parties in the post-war 20th century. Starting with the Reciprocal Trade Agreement Act in 1934, Congress embarked on a slow-but-steady retreat from protectionism that continued until the early 2000s. The passage of time has, unfortunately, dampened our memory of Smoot-Hawley’s self-inflicted wounds, to say nothing of Clay’s 19th-century failings. Now the National Conservatives deceive themselves into believing that they have rediscovered hidden knowledge from our economic past: knowledge that will allow them to beat the central planners of the left by putting their own spin on central planning from the right. In reality, they risk haplessly stumbling into the same mistakes that discredited Clay’s American System in the eyes of the last generation to experience its results.

America’s progressive left have always, either tacitly or by expression, bought into the impulses of economic planning. The shocking thing happening now is that we have conservative participation in the American System too, and why wouldn’t we? Tariffs are a dyed in the wool political winner for anyone who wants to push them onto the American people—even as they're a loser economically. Those people never seem all that interested in getting past the emotive costume of tariffs. “Let the other guy, the foreigner, pay the bill for a change.” That tariffs are coming back around to steal all kinds of American wealth never quite makes the evening news.

So elements of the right have jumped onto this centrally-planned economic train. And why wouldn’t they? There are illusions of easy political wins to be had. And that’s all you really need to know.

* * * *

Phil Magness is a Senior Fellow at the Independent Institute and the David J. Theroux Chair in Political Economy. He has served as Senior Research Fellow at the American Institute for Economic Research, and as Academic Program Director at the Institute for Humane Studies and Adjunct Professor of Public Policy in the School of Public Policy and Government at George Mason University. He received his Ph.D. from George Mason University' s School of Public Policy.
He is the author of multiple books and essays including Social Science Quarterly (Summer 2019) “James M. Buchanan and the Political Economy of Desegregation,” Co-authored with Art Carden and Vincent Geloso; “The American System and the Political Economy of Black Colonization.” Journal of the History of Economic Thought, (June 2015); “Morrill and the Missing Industries: Strategic Lobbying Behavior and the Tariff of 1861.Journal of the Early Republic, 29 (Summer 2009);  The 1619 Project: A Critique; and Colonization After Emancipation: Lincoln and the Movement for Black Resettlement.

James Harrigan is a former Senior Research Fellow at AIER. He is also co-host of the Words & Numbers podcast.
Dr. Harrigan was previously Dean of the American University of Iraq-Sulaimani, and later served as Director of Academic Programs at the Institute for Humane Studies and Strata, where he was also a Senior Research Fellow.
He has written extensively for the popular press, with articles appearing in the Wall Street Journal, USA Today, U.S. News and World Report, and a host of other outlets. He is also co-author of Cooperation & Coercion. His current work focuses on the intersections between political economy, public policy, and political philosophy.

This article was previously post at the AIER blog, and is republished here under a Creative Commons 4.0 License.


UPDATE:
So you now have the information to correct the bizarre a-historical assertion just made (below) by the Moron In Chief. So as a quick pop-quiz question, explain in 20 words or less why he is so mistaken. [HINT: In relation to tariffs and the production of wealth, you should probably use words like "despite" rather than "caused by."]



Sunday, 16 February 2025

The Trump Administration: "This gets back to my 'three levels of corruption' idea ... "


"This gets back to my 'three levels of corruption' idea, which I would summarise this way: Level 1 is 'Slip us come cash and we’ll do something extra for you.' Level 2 is 'Slip us some cash and we’ll actually do our job for once.' And Level 3 is 'Slip us some cash and nobody gets hurt.' 
    "The biopharma executives who are flying in for personal audiences with Trump or staying quiet while muttering about needed to keep up good relations are hoping for some Level 1 action, bracing for a lot of Level 2, and are terrified at the thought of Level 3.
    "They should be. Level 3 corruption is where government short-circuits into becoming a protection racket. And that, I should add, is one of the only ways in which our current president is capable of seeing the world and all the transactions in it. He’s a real estate developer from Queens who came up as a protegé of Roy Cohn - of course he does. His approach to dealing with Congress, to international relations, to trade, to most any issue at all is that of a mob boss: who’s shaking down whom, who gets the payoffs, who owes the favours, who takes a cut (...  this stuff has been glaringly evident for many years).
    "But that worldview is not (thank God) the ironclad rule of all human existence."
~ Derek Lowe from his post 'Stand Up And Be Counted' [hat tip Duncan B.]
RELATED (from 2018):
“I'M GOING TO GET a little wonky and write about Donald Trump and negotiations. For those who don’t know, I’m an adjunct professor at Indiana University – Robert H. McKinney School of Law, where I teach negotiations. Okay, here goes.
    "Trump, as most of us know, is the credited author of 'The Art of the Deal,' a book that was actually ghost written by a man named Tony Schwartz, who was given access to Trump and wrote based upon his observations. If you’ve read 'The Art of the Deal,' or if you’ve followed Trump lately, you’ll know, even if you didn’t know the label, that he sees all dealmaking as what we call 'distributive bargaining.'
    "Distributive bargaining always has a winner and a loser. It happens when there is a fixed quantity of something and two sides are fighting over how it gets distributed. Think of it as a pie and you’re fighting over who gets how many pieces. In Trump’s world, the bargaining was for a building, or for construction work, or subcontractors. He perceives a successful bargain as one in which there is a winner and a loser, so if he pays less than the seller wants, he wins. The more he saves the more he wins.
    "The other type of bargaining is called integrative bargaining
    "In integrative bargaining the two sides don’t have a complete conflict of interest, and it is possible to reach mutually beneficial agreements. Think of it, not a single pie to be divided by two hungry people, but as a baker and a caterer negotiating over how many pies will be baked at what prices, and the nature of their ongoing relationship after this one gig is over.

     "THE PROBLEM WITH TRUMP is that he sees only distributive bargaining in an international world that requires integrative bargaining. He can raise tariffs, but so can other countries. He can’t demand they not respond. There is no defined end to the negotiation and there is no simple winner and loser. There are always more pies to be baked. Further, negotiations aren’t binary. China’s choices aren’t (a) buy soybeans from US farmers, or (b) don’t buy soybeans. They can also (c) buy soybeans from Russia, or Argentina, or Brazil, or Canada, etc. That completely strips the distributive bargainer of his power to win or lose, to control the negotiation.
    "One of the risks of distributive bargaining is bad will. In a one-time distributive bargain, e.g. negotiating with the cabinet maker in your casino about whether you’re going to pay his whole bill or demand a discount, you don’t have to worry about your ongoing credibility or the next deal. If you do that to the cabinet maker, you can bet he won’t agree to do the cabinets in your next casino, and you’re going to have to find another cabinet maker.
    "There isn’t another Canada.
    "So when you approach international negotiation, in a world as complex as ours, with integrated economies and multiple buyers and sellers, you simply must approach them through integrative bargaining. If you attempt distributive bargaining, success is impossible. And we see that already.
    "Trump has raised tariffs on China. China responded, in addition to raising tariffs on US goods, by dropping all its soybean orders from the US and buying them from Russia. The effect is not only to cause tremendous harm to US farmers, but also to increase Russian revenue, making Russia less susceptible to sanctions and boycotts, increasing its economic and political power in the world, and reducing ours.   
    "Trump saw steel and aluminum and thought it would be an easy win, BECAUSE HE SAW ONLY STEEL AND ALUMINUM – HE SEES EVERY NEGOTIATION AS DISTRIBUTIVE. China saw it as integrative, and integrated Russia and its soybean purchase orders into a far more complex negotiation ecosystem.

"TRUMP HAS THE SAME WEAKNESS politically. For every winner there must be a loser. And that’s just not how politics works, not over the long run.
    "For people who study negotiations, this is incredibly basic stuff, negotiations 101, definitions you learn before you even start talking about styles and tactics. And here’s another huge problem for us.
    "Trump is utterly convinced that his experience in a closely held real estate company has prepared him to run a nation, and therefore he rejects the advice of people who spent entire careers studying the nuances of international negotiations and diplomacy. But the leaders on the other side of the table have not eschewed expertise, they have embraced it. And that means they look at Trump and, given his very limited tool chest and his blindly distributive understanding of negotiation, they know exactly what he is going to do and exactly how to respond to it.
    "From a professional negotiation point of view, Trump isn’t even bringing checkers to a chess match. He’s bringing a quarter that he insists of flipping for heads or tails, while everybody else is studying the chess board to decide whether it's better to open with Najdorf or Grünfeld.”

— David Honig, from his (now widely distributed) 2018 Facebook post

Saturday, 15 February 2025

"A central purpose is your top productive goal"


"A central purpose is your top productive goal. It’s stylised and utterly selfish ...     To refresh your recollection,'a central purpose is the long-range goal that constitutes the primary claimant on a man’s time, energy, and resources.' (Leonard Peikoff, OPAR)
    "A central purpose is important to adults of all ages, whether you are starting out, mid-career, or retired. If you want to lead a happy, selfish life, you need to integrate your values. You do this through a properly set and pursued central purpose. ...
    "Done right, a central purpose provides three psychological benefits:It simplifies everyday decision-making by clarifying your top priority and setting a standard for judging lesser ones
    "It connects mundane actions to a selfish end, thereby making them meaningful and motivating
    "It ensures you make visible progress across the years of your life, rather than falling into a rut or burning out ...
    "Recently I’ve been chewing how a central purpose makes you happier, and I thought I’d share my current perspective on that.
"1. A central purpose can transform routine work into a rich source of values
"A long-range goal makes the difference in whether productive work provides spiritual fuel or not. ... If you view work as 'punching the clock' to get money, it may fill your stomach, but it will not fill your soul.   But you can make any honest work into soul-nourishing activity by linking it to your central purpose. ...

"2. A central purpose is essential to reducing internal conflict
"... You feel conflict when you are pulled in two directions and either you don’t want to decide or you can’t decide which direction to go. This is particularly problematic for people who have a 'flat' value-hierarchy, meaning all of their values are of similar importance. ...
    "You need strong values to experience great joy. When you choose a central purpose, you create a standard for prioritising your values. This makes it easier to choose between them. ...

"3. A central purpose adds deep meaning to your life
"... The only source of meaning for your life that is entirely under your volitional control is your central purpose. It is your choice of what you want to create with your life. It is your vision of the future that you commit to. With a central purpose, you decide what would be meaningful. That it’s your long-range goal can make the journey itself become meaningful."

Friday, 14 February 2025

The Ministry of Culture and Heritage is a Soviet-sounding name for a Ministry, with proposals for 'modern media legislation' to match


"[T]he Ministry of Culture and Heritage ... is a rather Soviet sounding name for a Ministry ... [with] a policy culture that is quite distinctly interventionist. Its proposals for [so-called]'modern media legislation' ... reflects the lobbying of vested interests in the uneconomic media industry to try to compete with the media the public actually prefer. ...
    "Today people largely obtain news and entertainment online ... on multiple devices. If news happens, it is reported through news websites and through social media. Moreover, entertainment largely comes from overseas ...
    "[T]he barriers to publishing are [now] very low indeed. ... Protectionists, legacy media and politicians with a bent for influencing the public don’t like it that much. ...
    
"Media and Communications Minister Paul Goldsmith has decided to release a discussion document with five proposals to 'save local media.' It reflects a very shallow approach to public policy ... 'New Zealand’s media and content production sectors are facing an uphill battle to remain viable' [says the minister] 'Seeing and hearing our stories and voices has cultural and societal benefits' [he claims]... I’d suggest the uphill battle is simply due to the public not responding to what they produce. ...
    "We all have stories. ... 90% or so of the population with computers, tablets or mobile phones [tell them every day]. Tens, hundreds and in some cases thousands read or listen to them. What are the 'cultural and economic benefits' of ignoring this in favour of what is essentially a protectionist industry wanting other people’s money taken from them by force, to prop them up because the public isn’t willing to pay for their content voluntarily?
   
"... [Goldsmith's] proposal says everything about how out of touch the Ministry is. It is ....
"...to force manufacturers of smart TVs (not tablets or laptops or phones) to carry apps of traditional NZ broadcasters. ...
"... to force streaming platforms and TV broadcasters to waste their own money on what the Ministry falsely calls 'investment' into the local content the Ministry approves of. ...
"... to expand the scope of the increasingly irrelevant Broadcasting Standards Authority (a better proposal would be to scrap it) to 'ensuring positive system-level outcomes,' whatever that means. ...
"Most of these proposals ... demonstrate an ongoing philosophical belief in the role of a interventionist state in forcing others to pay for the production of content that the Ministry thinks is good for people. ...
    "What should be done instead? Stop trying to save something that people don’t want. ...
    "The Broadcasting Standards Authority should be wound down ... NZ On Air should be wound down as well. ... The Film Commission similarly so. Privatise TVNZ. ...

"You have until 23 March to submit on [the Ministry's] proposal"s, go right ahead."
~ Liberty Scott from his post 'Forget Goldsmith's media proposals'

Thursday, 13 February 2025

"Determining what qualifies as a ‘hate crime’ is entirely subjective and threatens to simply create a bigger stick"



"[D]etermining what qualifies as a ‘hate crime’ is entirely subjective ... and threaten[s] to simply create a bigger stick with which to beat unpopular views.
    “Criminal acts motivated by hate are already illegal and should be prosecuted to the fullest extent of the law. However, categorising an existing offence as a ‘hate crime’ means punishing not just the action, but the perceived thoughts or motivations behind it.
    “New Zealand law already permits judges to consider motivation as an aggravating factor under the Sentencing Act. This is the right approach—judges daily use their subjective discretion in determining appropriate punishments.
    “Throwing red paint on an MP's office in response to the conflict in Gaza? Defacing an installation of the English version of the Treaty in Te Papa? Vandalising a rainbow pedestrian street crossing? All of these are [already] criminal offences—all should be addressed appropriately under the law. But who decides which is a ‘hate crime’?
    “No jurisdiction in the world has created an objective standard for ‘hate.’ Trying to legislate against something so subjective will lead to confusion and inconsistency in enforcement. There is far too much room for ideological interpretation when deciding if a crime constitutes as ‘hateful’ and to what extent. ...
    "Internationally, ‘hate crime’ laws have proven to be easily [exploited]. The rule of law is too important for our democracy to get caught up in subjective and ideological debates that undermine clear legal standards.”
~ Free Speech Union's submission on the Law Commission’s foolish consultation on hate speech law [More here]

Wednesday, 12 February 2025

10 good things from Trump 2.0 ... a work in progress


Robert Nasir writes:

"Just about everyone here knows my stand on the [US] President ... he is a dishonest, power-hungry, narcissistic, crude, lecherous, adulterous, dictator-envious, free-speech-threatening, felonious, insurrectionist bully ... and his election was a bad, bad thing for the country, for many reasons, both concrete and abstract, for our culture and for our philosophic future.
    "But for all of that (and more), folks can read my other posts & comments, and follow me on all the socials.
    "Here, I am working on the rest of the story.
    "Including, among other things, listing some of the reasons why some reasonable people ... people we all know, and respect ... support the President. ...

"I've already published my list of reasons why President Trump is a force for ill [the worst thing is that he has destroyed the Republican Party, turning it into the Party of Trump. For all its faults and flaws, the Republican Party was a credible opposition party.
    "No longer. Trump has crowded out or silenced (i.e. cancelled) all independent, principled voices in the Party.]
    "And this matters, crucially, because The Left DOES need to be fought. For all its faults and flaws, the Republican Party was a credible opposition party...
"But this current list is important (at least, to me) for keeping the full context, and understanding why some very good people continue to support him. ...
[So] I'm putting together my list of good things Donald Trump has done ... a very loose category, but important for acknowledging the full reality of what's going on. ...
  1. "He has condemned, and imposed sanctions on, the International Criminal Court (ICC). (Feb 6 2025)
  2. "He has started the process of withdrawing from The United Nations by withdrawing from, and ending support for, the UNHRC; the UN Educational, Scientific, and Cultural Organization (UNESCO); and the UN Relief and Works Agency for Palestine Refugees in the Near East (UNRWA). (Feb 3 2025)
  3. "He has committed to deregulation via a 10-for-1 directive and annual financial review of federal regulatory agencies. While the method is arbitrary, ad hoc, and untargeted, it will have at least some positive impact. (Jan 31 2025)
  4. "He has passed measures to condemn and combat Anti-Semitism in federally supported institutions (including, but not limited to, public universities). (Jan 29 2025)
  5. "He has (once again) withdrawn the United States from the Paris Climate Agreement. (Jan 25 2025)
  6. "He has ended the federal EV mandate (surprisingly, given its favourability to Elon Musk). (Jan 20 2025)
  7. "He has passed an EO to deregulate energy production broadly, across all forms, on federal lands and waters (including, e.g., re-opening offshore drilling the Outer Continental Shelf, expediting the permitting and leasing of energy and natural resource projects in Alaska). (Jan 20 2025)
  8. "He ended the affirmative action mandate in federal government hiring. (Jan 20 2025)
  9. "He has initiated the US withdrawal from the World Health Organization (WHO). (Jan 20 2025)
  10. "His 'Initial Rescissions Of Harmful Executive Orders and Actions' include the repeal of a 78 previous orders, the majority of which were inappropriate, economically harmful, and otherwise detrimental or dangerous."
That said ...
"The last time around [points out Keith Weiner], he claimed to deregulate--but in fact [simply] increased regulations at a slower pace than Obama increased them. Trump also increased the aggressiveness of compliance enforcement of financial regulations to the point where the banks were forced to closed God knows how many accounts, and retrain all employees from tellers to executives in the new Anti-Money Laundering regime."
Not to mention adding so much debt he oversaw the third-biggest deficit increase of any president in history! And, well, it was him who kicked off those trade wars.

So ...
"It’s good to keep records on all this, to be objective [says Amy Nasir]. But yes, the method of the man is that of a rabid squirrel, and if these ten things prove to provide a better future in some ways, they are accidental and most likely short-term gains. In the meantime, it’s almost impossible to list all the cons of the conman."

Tuesday, 11 February 2025

Friedrich Hayek on equal opportunity vs equal outcome


"The classical demand is that the state ought to treat all people equally in spite of the fact that they are very unequal. You can’t deduce from this that because people are unequal you ought to treat them unequally in order to make them equal. And that’s what social justice amounts to. It’s a demand that the state should treat people differently in order to place them in the same position. . . .To make people equal a goal of governmental policy would force government to treat people very unequally indeed. ...
    “In order to make people equal, you have to treat them differently. If you treat people alike, the result is necessarily inequality.
    “You can have either freedom and inequality, or un-freedom and equality.”

~ Friedrich Hayek interviewed by William Buckley & Jeff Greenfield

 

Monday, 10 February 2025

"So let's look at three explanations for NZ's secular stagnation that the big media outlets refuse to blame."


"The country does not appear to [just] be in a cyclical down-turn. ... The evidence ... points more to a long-lasting slow-down ... which has turned [New Zealand's economy] into one of worst performing in the world. ... [The reasons] remain unaccounted for. The 'experts' quoted in the mainstream media, who work for the Big Banks and NZX 50 firms, don't have a clue, though not the modesty to admit it. ...
    "So let's look at three explanations for NZ's secular stagnation that the big media outlets refuse to blame.
    "First, the vast number of New Zealanders who now 'work' from home. ... An article published in the National Bureau of Economic Research is being quoted world-wide which estimates falls in productivity of around 18% once a person works from home. ...This outbreak of collective laziness is more than able to explain why the country has stagnated. ...
     "Second, many of the Board members and CEOs of our largest corporations are nothing short of useless. Many are accountants & lawyers who know little about the core business. ... The higher echelons of NZ corporates have descended into an inbred club of status-seeking social climbers who aren't the real deal. ...
    "Third, our national energy has been increasingly sucked up by [endless] Treaty debates. ... spawning industries of academics, lawyers, politicians and media types who do nothing productive, other than argue with one another. ... It has emerged that property rights, the fundamental driver of economic growth, are thereby insecure in NZ, making it a terrible place to keep your money and invest. ...
    "[I]t is [therefore] entirely plausible that [all of our economic stagnation is due to] the vast numbers of Kiwis who are now pretending to work from home, hiring and promotion policies not based on merit, ... along with endless going-nowhere Treaty debates which have consumed the energy of the country ..."

~ Robert MacCulloch from his post 'Should NZ's secular stagnation be due to working-from-home, lack-of-meritocracy & endless Treaty debates, then we can forget economic growth.'


Saturday, 8 February 2025

"Trump has the ambitions of a dictator but not the attention span"


"It’s all just for show. Trump’s supporters get to see him being mean to foreigners, and that’s enough for them.
    "In short ... mass deportations ... and the tariffs—again, so far—are following the script I had hoped for [i.e., a phantom menace], while still finding it annoying. Donald Trump likes watching TV and being on TV. He likes attention and an exciting script. But he doesn’t care much about details or substance, so long as he’s at the exact geometric centre of attention and gets supplicating phone calls from foreign leaders, and he can squeeze it all into a narrative that makes him look like a tough guy. And his supporters love this and are very happy with it.
    "This fits a general pattern you might remember from his first administration. Trump has the ambitions of a dictator but not the attention span, the focus, or the attention to detail necessary to impose it.
    "Alas, not everyone around him suffers from this disability."

~ Robert Tracinski from his post 'A Coup Within a Coup'

Friday, 7 February 2025

Perhaps if MPs did have an actual argument, they would use it?


"When did it become permissible for Members of Parliament to treat select committee submitters with condescension, disdain or thinly disguised contempt? ... for men and women with impeccable professional reputations and years of service to the New Zealand community to expect their appearance before a parliamentary select committee to serve as an excuse for MPs to hector and insult them, and to ignore completely the content of their submissions?
    "Sadly, the answer to those questions would appear to be ‘right here, right now’. ...
    "All the evidence required to construct the case is readily accessible in the official video recordings of the Justice Select Committee’s hearings on the Treaty Principles Bill, particularly in the reception given to retired District Court Judge, David Harvey, by MPs representing Labour and Te Pāti Māori. ...
    "Why submit oneself, or one’s ideas, to such dismissive treatment? ...
    "Some have written-off [a 2021] incident [involving Deborah Russell] as just one more example of covid-induced madness.
    "But, if that is the explanation, then how is the extraordinary rudeness towards David Harvey and other submitters in support of David Seymour’s Treaty Principles Bill to be accounted for?
    "Why would Labour’s Willie Jackson feel free to chide a former District Court judge, whose career is as distinguished as it is free of professional and/or personal blemish, as if he were some errant legal backwoodsman, unaware of the intellectual powerhouses ranged against his unsophisticated opinions?
    "Why would Te Pāti Māori’s Rawiri Waititi imply that the submissions of a judicial officer backing Seymour’s bill largely explain the ongoing legal oppression of his people?
    "Why would the Labour MP for Christchurch Central, Duncan Webb, a former law professor, show no interest in addressing the legal arguments contained in Harvey’s submission? ...
    "The kindest construction one could put upon the conduct of the three MPs in question is that they are unshakeably convinced that the “European colonialist” ideology contained in the Treaty Principles Bill poses such an existential threat to the future of Māori in Aotearoa that any serious consideration of arguments submitted in support of it cannot be countenanced. Those offering such support do not deserve to be taken seriously and should not expect to be. ...
    "To rule out even the possibility of compromise can only hasten the transformation of select committee hearings into the 21st century equivalent of Soviet-era show trials, the sole purpose of which would be to demonstrate publicly the adverse consequences of wrong-think."


Wednesday, 5 February 2025

For MAGAts, it's Schrodinger's tariff threats all the way down

 

Yeah, I know, talking about tariffs, tariff threats and tariff retaliation can get tedious. 

But the threats are real. And the US president doesn't care about the destruction of world trade (google "Smoot Hawley Great Depression" if you want a clue) — and the MAGAts don't care about anything much beyond "owning the libs" and all the 4d chess their hero is allegedly playing.

Except it's neither chess nor 4d. MAGAts are now touting the "concrete behavioural changes" the tariff threats allegedly caused in Canada and Mexico. Except, as Phil Magness patiently explains, much of what was "achieved" was either already in motion or could easily have been accomplished through less aggressive means.

  • Trump boasts his tariff threat brought 10,000 Mexican soldiers to the border. Yet in 2023  he claims that his threat of a wall brought 23,000 soldiers to the border (since dispersed). So "Trump got a significantly worse deal today than he claims he got 5 years ago without any tariffs. Does that mean he got stomped?" 
  • And Canada had already announced in December last year its plans to "strengthen border security* and [its] immigration system." "So Trump's big negotiating 'win'... ...is to get Canada to do what it already announced it was doing back in December. And his 'win' with Mexico is to get them to commit 1/3rd of the troops he previously got them to commit with no tariffs in 2019. 4D chess, everybody!"

As one person wryly commented, "It's the art of claiming credit for the deal."

So how d'ya reckon MAGAts will cope with the revelation of the Great Tariff Negotiator getting played by Justin Trudeau, no less — convincing Justin to "concede" to a plan he'd already announced last year? Magness looks ahead:
Prediction: most of the Tariff Fundamentalists who are touting tariffs as a "negotiating tactic" today will resume their calls for tariffs as an economic protection strategy a few days from now. A few days later they will call it a revenue source. Then a negotiating tactic again.

As another commenter observed, for MAGAts it's Schrodinger's tariff threats all the way down. 

Oh, by the way. Whoever disagrees with Trump and the MAGAts on any of this is "an anti-American conspirator" and also "controlled by China."

If words like "imbecile" and "unhinged" occur to you about now, you're not alone.

* * * * 

* NB: Note that the border security is ostensibly to arrest to the terrible threat of fentanyl pouring across the Canadian border. Yet: 

The amount of fentanyl that comes across the border from Canada is negligible. In 2024, DEA stats that just 43lbs were intercepted at the entire northern border, which is just 0.2% of total fentanyl seizures entering the US in that period.
    So even if you think fentanyl is a problem justifying some sort of policy response, it's a complete waste of resources to focus them on the US-Canada border. It's also likely that the increased border enforcement there will create other bureaucratic hassles and inconveniences for routine border crossings, as most police-heavy drug enforcement efforts do.

Like almost everything with Trump, he just makes stuff up. Except "instead of the Big Lie, it is the Little Lie. Thousands upon thousands of them. They keep everyone off kilter trying to rebut them."


"The essence of capitalism's foreign policy is free trade ... "


"The essence of capitalism's foreign policy is free trade — i.e., the abolition of trade barriers, of protective tariffs, of special privileges — the opening of the world's trade routes to free international exchange and competition among the private citizens of all countries dealing directly with one another.
    "During the nineteenth century, it was free trade that liberated the world, undercutting and wrecking the remnants of feudalism and the statist tyranny of absolute monarchies."

~ Ayn Rand, from her 1966 article 'The Roots of War'


Tuesday, 4 February 2025

"Economic wars often turn into military wars."



"President Trump made it clear during his presidential campaign that tariffs will be a part of his policy-making. He has followed through on that. But tariffs are very risky business. Yes, you can get lucky with them being a political tool at times. 
    "But tariffs can also turn very bad, especially when egos get revved up. American history is littered with the use of tariffs going very badly. 
    "President Trump, and the American people, should always keep that in mind. 
    "Economic wars often turn into military wars. 
    "Given the bankrupt state of our nation, any type of war should be the furthest thing from our minds. It could end up being the last nail in the coffin. 
    "Best to focus intensely on cleaning our own house."
~ Ron Paul

 

"A writer who disdains the semicolon is a fool."


"A writer who disdains the semicolon is a fool. In fact, hostility to this most delicate and lyrical of punctuation marks is a sure sign of a deformed soul and a savage sensibility. 
    "Conscious life is not a brute concatenation of discrete units of experience; it is often fluid, resistant to strict divisions and impermeable partitions, punctuated by moments of transition that are neither exactly terminal nor exactly continuous in character. Meaning, moreover, is often held together by elusive connections, ambiguous shifts of reference, mysterious coherences. And art should use whatever instruments it has at its disposal to express these ambiguous eventualities and perplexing alternations. 
    "To master the semicolon is to master prose. To master the semicolon is to master language's miraculous capacity for capturing the shape of reality."
~ David Bentley Hart from his post 'On Writing, Part Two' [hat tip @NickFreiling]

 

Monday, 3 February 2025

Tariffs, Trump & the Chicken Wars


News this morning that that the dumbest US president in some time has started the dumbest trade war in history’ — that evaluation, by the way, is by the Wall Street Journal— that's 25% tariffs slapped on Canada and Mexico, and 10% tariffs on China, with tit-for-tat retaliation already promised in return.  (Or as James Valliant & Daniel Kraus explain things more accurately: 'Trump Puts a New Tax on Americans–Canada Shoots Itself in Return.')

Here's a bit of an explainer about tariffs for you to help you get your head around it all, along with an 'amusing' story about the Chicken Wars   ...




PS: The US Tax Foundation estimates Trump's 25% tariffs on Canada and Mexico and 10% tariffs on China will:  
  • Increase taxes by $1.2T (2025-2034)  
  • Reduce GDP by 0.4%  Reduce employment by 344k jobs  
  • Result in an average tax increase of $830 per US household (2025)
And the Wall Street Journal estimates that Trump's tariffs of 25% on imported steel and 10% on aluminium.
will punish American workers, invite retaliation that will harm U.S. exports, divide his political coalition at home, anger allies abroad, and undermine his tax and regulatory reforms. The Dow Jones Industrial Average fell 1.7% on the news, as investors absorbed the self-inflicted folly.
So: Make America Poor Again? Just wilful economic destruction simply in order to ... what? Feed one ignorant ego?

UPDATE:
Cartoonist Bruce McKinnon has an even simpler explainer ...




Friday, 31 January 2025

"When politicians start talking about competition, economists ought to get a little bit nervous."


"It’s fair to say that economists like competition.
    "It’s also fair to say that when politicians start talking about competition, economists ought to get a little bit nervous.
    "People can have very different understandings of the same word. ... At the heart of the difference – while trying to avoid the boring bits – is how we understand the term competition. Is a competitive market one where there is some ‘right’ number of companies, of the ‘right’ sizes relative to each other? Or is a competitive market [an open market —] one in which no special permissions are needed to set up shop and every firm always needs to be looking over its shoulder?
    "Sometimes, the two amount to the same thing. ... But not all competitive markets, by the one definition, are open by the other. And not all open markets are ‘competitive,’ if we measure things by counting companies. Openness matters more – both when thinking about customers’ experiences, and about government policy. ...
    "When markets are open, underperformance by existing competitors ... is potential profit for new entrants – and better service for customers. ...
    "And that gets us back to my worries when politicians start talking about enforcing more competition. ... If the Government wants to focus on openness [on reducing barriers to entry], it could do much good. ...  There are no shortage of places to shine a flashlight. ...
  •     "Successive Commerce Commission market studies identified regulatory and policy-based barriers that make it incredibly difficult, if not impossible, for new firms to compete with incumbents.
  •     "The market study into building materials noted the lack of land zoned for new big-box retail suppliers ...
  •     "The commission’s final report into grocery retail found a similar problem. ...
  •     "Similarly, the commission warned that regulatory barriers hinder competition in banking. ...
  •     "Opening a new pharmacy is tied up in weird regulations about who is allowed to own pharmacies. ...
  •     "Many occupational licensing regimes look an awful lot like cartels organised to protect incumbents. ... I wonder [for example] why anyone should need special permission to be a real estate agent. ... Are we quite sure that regime is still needed?
    "It is a target-rich environment, if we are thinking about openness. ....

"The Government could help to bring down prices and improve the products on offer for consumers if it focused on ensuring market openness. Political campaigns against existing businesses may be more tempting, but they will do less good."
~ Eric Crampton from his article 'When politicians campaign on competition, be very worried'

Thursday, 30 January 2025

The Flattery Towards Trump Reveals Fear



Tech billionaires aren't crawling to Trump because they're powerful, argues Johan Norberg in this guest post. It's because they're weak...

The Flattery Towards Trump Reveals Fear

by Johan Norberg

TECH MOGULS AREN'T FLATTERING TRUMP because they're drunk on power, but because they're afraid. The political arbitrariness that began with Biden risks becoming even worse with Trump.


Mark Zuckerberg, Jeff Bezos, and Elon Musk were among the guests at Donald Trump’s inauguration. 

At Trump's inauguration, the new president was surrounded by a grinning, applauding Forbes list. Among them were the world’s three richest men, Elon Musk, Jeff Bezos, and Mark Zuckerberg, as well as relatively less wealthy figures like the CEOs of Apple and Google. Sitting in more prominent seats than the incoming cabinet members, it certainly looked like the happy plutocrats had bought themselves a president.

They all donated to the inauguration fund and have, in other ways, signalled an approach. Bezos blocked the Washington Post’s official endorsement of Kamala Harris, and Zuckerberg admitted that Facebook became too woke and now needs to be more Texas.

Is the U.S. on its way to becoming a tech oligarchy? Biden’s speechwriters are among those warning of a tech-industrial complex with so much power that they threaten to disable democracy.

As a liberal, I’m conflicted. The only thing worse than a Trump administration run by big corporations is a Trump administration not run by big corporations. Since their position isn’t built on charming inflamed MAGA fans, but on solving technical and business problems in a global economy, they will exert a moderating influence. When Trump wants to imprison opponents, stop global trade, deport all migrants, or invade Greenland, they will try to get him to count to ten (though I no longer dare rule out anything regarding Musk).

Tesla’s 15% stock increase after Trump’s victory shows that someone's proximity to power is disturbingly valuable.

On the other hand, it’s impossible not to feel deep concern when the most powerful state and the largest capital are in the same boat. Tesla’s 15% stock increase after Trump’s victory shows that someone's proximity to power is disturbingly valuable. When I recently interviewed Musk, he said the state should act as a referee but not interfere in the game, which was wise. But it doesn't get better when a player wants to play referee.

Money doesn't buy elections—after all, Harris had more than the eventual victor—but it can buy influence with its recipients. Especially with someone as notoriously "transactional" (we used to say unprincipled) as Donald Trump. Just a year ago, Trump wanted electric car supporters to "rot in hell." Today, he is pro-electric cars, “I have to be because Elon endorsed me very strongly.”

But unsuitability is not the same as oligarchy. In fact, tech companies haven't assumed this role because they're so strong, but because they're so weak.

THIS IS MISSED IF YOU simply follow stock prices, but the big change in recent years is that Big Tech has gone from being everyone’s hero to everyone’s villain. After Trump’s 2016 victory, previously friendly Democrats started seeing social media as sewers of disinformation and demanded strict content control. The Biden administration also launched potentially devastating antitrust proceedings.

And no matter what they do, someone takes a swipe at them. When platforms became cosily progressive and moderated more content (even stories that turned out to be true), the right started seeing them as leftist censorship machines. Republicans like J.D. Vance and Josh Hawley demanded regulation and breakups. Trump threatened fines and monopoly laws to crush Amazon and Google. With few watertight principles for such power exercises, there are real risks of political arbitrariness. During the election campaign, Trump threatened to imprison Zuckerberg for life.

Tech giants suddenly realised they had lost all political allies.

This is especially dire as they simultaneously face existential risks in key foreign markets. Regulation-happy EU threatens their business models. Many were also shocked last year when Brazil's Supreme Court responded to Musk's refusal to block a series of X accounts by shutting down the entire platform and freezing Starlink’s assets—a completely different company with other stakeholders.

If Big Tech wants a chance in international battles over antitrust, censorship, and taxation, they need the U.S. on their side. Zuckerberg explicitly stated this in his recent repentance speech. The world wants to censor us, and “the only way we can counteract this global trend is with support from the American government.”

This isn't about people who love Trump. Except for Musk, none of the major players supported him before his victory. On the contrary, they’ve long fought against him but lost and are now pleading for mercy—and protection. Musk’s new role made it even more important to be there as a counterbalance to him since he's a tenacious critic who, among other things, has said that Amazon is a monopoly that needs to be broken up. Contrary to the notion of a homogeneous flock of bros, these men are jealous rivals vying for each other’s market shares. And suddenly a new Chinese AI model comes along that threatens all their inflated valuations.

So, the tech moguls aren't flattering Trump because they’re power-drunk, but because they’re scared. Bezos doesn’t humiliate himself with an ingratiating Amazon Prime documentary about Melania Trump because he can do whatever he wants, but because he can't.

The sad spectacle of the past few weeks has many calling for a mightier state to put the plutocrats in their place. On the contrary, I feel an urgent need for a few more independent billionaires who aren’t subject to such political arbitrariness that they constantly anxiously follow political trends.

* * * * 

Johan Norberg is a Swedish author and historian of ideas, devoted to promoting human progress, economic globalisation and classical liberal ideas.

This post is translated from Blacksmith, where it first appeared.