Adam Smith he ain’t

Far be it from me to suggest that a statesman must be an intellectual or even a serious political thinker.

For example, the only British PM who could be so described was George Canning, and he only served in that capacity for four months before his death in 1827.

Yet that doesn’t mean Britain hasn’t had any effective statesmen since then. It’s just that the age of philosopher kings so dear to Plato’s heart has passed – if indeed it ever existed.

The USA, being originally an ideological contrivance, had to be founded by educated ideologues. And, while my admiration for the Founders isn’t limitless, as thinkers they inhabited a different planet from the residence of subsequent presidents.

For example, when John Adams was ambassador to France, he was asked to join the debate between the Federalists and the Republicans. In response, over the next fortnight he produced an 800-page book that’s still a standard text of political science.

Donald Trump straddles the other extreme. He wouldn’t be capable of even reading such a book in a fortnight, never mind writing one. Now while for a US president to be an intellectual isn’t necessary and may even be undesirable, the other extreme, being a complete ignoramus, isn’t helpful and may even be dangerous.

This, I’m afraid, is Trump’s problem. That’s why he constantly swings from sound to pathetic, with everything in between. Witness his first presidential tour of foreign lands, which Trump himself described with his characteristic modesty and Mussolini-like grimaces as “a home run”.

I’m ready to applaud Trump’s reference to ‘Islamic’, as opposed to a PC ‘Islamist’ terrorism, along with his pointed refusal to tout the two-state solution on his visit to Israel. Yet my applause would be heartier if at the same time Trump hadn’t undertaken to supply $100 billion worth of arms to Saudi Arabia, known sponsor of terrorism.

His lack of enthusiasm for the Paris Accord and the whole global warming rubbish is welcome, especially since it infuriated Frau Merkel, which is always a good thing. Trump’s attack on “bad, very bad” Germany was also not without foundation, although I’d be tempted to mention that the EU is by its nature a protectionist bloc.

However, Trump’s specific complaints about Germany revealed economic ignorance astounding in a graduate of Wharton. He must have played truant during those seminars on free trade.

Witness this remark about the “bad, very bad” Germans: “See the millions of cars they are selling in the US? Terrible. We will stop this.”

Merkel objected that this lamentable situation was “partially due to the high quality” of German cars and that a change in policy wouldn’t make people “buy more Cadillacs”. It pains me to say so, but she was absolutely right.

People don’t buy American cars because they aren’t very good: 10 of the 13 “cars to avoid at all costs” on the Forbes list are US-made. While those turnpike cruisers can just about pass muster on those endlessly empty motorways out West, they’re no good for crowded, winding European roads.

Europeans don’t mind driving Asian imports, and the Asians flood Europe with their cars despite the EU’s restrictive practices. Those Americans who can afford it would also rather drive a BMW than a Chevy.

The way to “stop this” is for Detroit to start making better cars, not for Trump to slap tariffs on German vehicles. When American products, such as those made in Silicon Valley, are good enough, Europeans are happy to buy them.

The US motor industry is a basket case, and a few years ago it took vast government bailouts to keep it afloat. Protectionism won’t improve the situation, quite the opposite.

Those Wharton students who weren’t playing truant must have been taught that any policy that hurts the consumer will hurt the whole consumer economy. Does Trump think that slapping, say, a 10 per cent tariff on Audis will make Americans buy Chryslers instead?

It won’t. They’ll bite the bullet and cough up an extra five thousand for the better machine. Hence they’ll have five thousand less to spend on more competitive American products, such as those made in Silicon Valley. Jobs thereby protected in Detroit will be lost in Palo Alto, reducing the overall competitiveness of US industry.

Protectionism causes untold damage by mollycoddling domestic production behind a wall of near-monopoly. That anyone should deem this necessary can only mean that domestic production was ineffective to begin with.

Yet when its incompetence is artificially protected from better rivals, it’ll have little incentive to get its act together. Quality will go down, prices will go up, funds will be channelled into the least – and away from the most – productive areas.

This is the ABC of economics, taught by every serious economist, from Adam Smith to David Ricardo to Milton Friedman. Thus, for example, Smith:

“To give the monopoly of the home-market to the produce of domestic industry… must, in almost all cases, be either a useless or a hurtful regulation. If the produce of domestic can be brought there as cheap as that of foreign industry, the regulation is evidently useless. If it cannot, it must generally be hurtful.”

Trump’s thinking on such matters is shockingly primitive, in line with the old bumper sticker “Buy a foreign car, put 10 Americans out of work”.

Unfortunately, his intellectual failings are married to the character traits of a vulgar, overconfident parvenu. If Trump possessed Ronald Reagan’s diffident charm and common sense, his ignorance of every political discipline wouldn’t matter very much.

Alas, he shows the effrontery of an autodidact, or rather a nondidact. I just hope he’ll be able to learn on the job before causing major damage.

5 thoughts on “Adam Smith he ain’t”

  1. ” Now while for a US president to be an intellectual isn’t necessary and may even be undesirable, the other extreme, being a complete ignoramus, isn’t helpful and may even be dangerous.”

    Don graduated from the Wharton School of Business. They hardly take the laggards and the regimen of study is difficult. He must have some brains up there.

  2. “For example, when John Adams was ambassador to France, he was asked to join the debate between the Federalists and the Republicans. In response, over the next fortnight he produced an 800-page book that’s still a standard text of political science.’

    John and his son John Quincy generally rated as the smartest men ever to have been President. NO ONE has been able to improve on them in two-hundred years.

  3. AB,
    This isn’t a full scale rebuttal as much as it is a “Yeah, but…”
    The key words above are “those who can afford”.
    Follow me.
    If John Wallstreet can afford to peel off $70,000 for a top of the line BMW, he can sure go an extra $5-6,000 to eat the tariff. In the 1980s Americans paid “luxury taxes” and “gas guzzler” taxes on Ferraris and Lamborghinis as well as Cadillacs and Lincolns. Those were actually backdoor INCOME taxes – I digress.
    Now.
    If John FedEx Driver, or Mary Middle Mangement budgets $30,000 for a new car, yet, the tarrif on a base model BMW adds $5-6,000 , well, No. They are not going to eat the tariff. They most certainly will consider a Ford or Chevy.
    Which will, as you have said, introduce a whole different set of troubles with tariffs in general, not the least of which being that tariffs will always create an initial bubble.
    And why??
    Because tariffs assume to predict and STEER an unpredictable market.

  4. “It’s not what you have that matters, but how you use it.”

    By that criteria Obama was a nothing compared to Trump when assuming office. The man with a Harvard law degree a community organizer. I know that area of Chicago, IL. USA where Obama did community organizing. Roseland they call it. You should go and see for yourself.

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