The Last Places on Earth  

Journeys in Our Disappearing World 
by Gary Mancuso
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Trump's Carrier Deal: The Art of Making America Poorer and Less Free

Trump “saves” a thousand jobs. Chalk one up for America, right? Well, actually, no. The deal pays Carrier, at the taxpayers’ expense via tax concessions, to continue uncompetitive and uneconomical production in Indiana. In the long run, nothing of value will have been achieved. The workers affected will not grow in skills that will make them more productive, and the company won’t be more competitive—which, after all, is the central idea of a free-market capitalist economy. And the government has now intervened, on a micro scale, directly in the marketplace by directing the allocation of capital. At best, this type of governmental meddling is the kind of thing that has turned France into a mildly dysfunctional economy. At its extreme, it is a baby step toward the disastrous model that has turned Venezuela into an economic basket case.

Along with the tax concessions, the implied threat to $5 billion plus in federal contracts to the Pentagon was unspoken, but no doubt present to Carrier's parent company, United Technologies. The leverage here being the company’s Pratt and Whitney unit, which supplies jet engines for the Air Force’s most advanced fighter planes. So we have a company taking an uneconomic action to satisfy the top man in government, apparently with the idea in mind that it will continue to keep its larger federal contracts intact. This is a dangerous precedent toward crony capitalism, such as in Putin’s Russia (or Venezuela), that ultimately rots an economy from the inside out and destroys its long-term competitiveness. A question we might now reasonably ask is, how many other companies will threaten to offshore some or all of their production to get concessions from the new president?

One of the lessons of my long journey into what I refer to as “Our Disappearing World” is this simple truth: countries that function under a reasonably clear rule of law work better than countries that do not. Their people enjoy better economic prospects, prosperity, and basic freedoms, and the environment generally fares much better. I don’t normally agree with everything Larry Summers has said. But in a commentary he wrote in the Washington Post (excerpted below), he gives an excellent summary of the rule-of-law issues involved:

The commentary on the president-elect’s actions has emphasized its novelty, has emphasized the difficulties of scaling, and in the case of Sen. Bernie Sanders (I-Vt.), has argued that the actions taken were insufficiently forceful because some workers will still be relocated to Mexico. All of this misses the point. Presidents have enormous latent power, and it is the custom of restraint in its use that is one of the important differences between us and banana republics. If its ad hoc use is licensed, the possibilities are endless. Most companies will prefer the good to the bad will of the U.S. president and his leadership team. Should that reality be levered to get them to locate where the president wants, to make contributions to the president’s reelection campaign, to hire people the president wants to see hired, to do the kinds of research the president wants carried out, or to lend money to those that the president wants to see assisted?

Some of the worst abuses of power are not those that leaders inflict on their people. They are the acts that the people demand from their leaders. I fear in a way that is more fundamental than a bad tax policy or tariff we have started down the road of changing the operating assumptions of our capitalism. I hope I am wrong, but I expect that as a consequence we are going to be not only poorer but less free.

America has just handed tremendous power to a man with little experience at government, policy, foreign affairs, and economics. The Carrier deal indicates that he may not know much about how a free-market economy works, even though he has vowed to revitalize America’s. This is not an auspicious start to “making America great again.” Indeed, whether we can even keep America pretty good is very much in question.


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