Monday, March 21, 2016

"What Donald Trump Doesn’t Understand About ‘the Deal’"

I have spent much of the past few months trying to make sense of Trump’s policy proposals. His website lists his major priorities as, in order: health care reform, China-United States trade agreements, Veterans Affairs reform, tax reform, gun rights and immigration reform. There are no other issues addressed at length. It’s a puzzling mix. Any serious economic proposal to ‘‘make America great again’’ would surely mention education, fiscal policy, entrepreneurship and trade with the entire world, not just China — issues he makes little or no reference to. No doubt Trump’s list of priorities reflects the issues that he and his advisers perceive, probably correctly, to be red meat for Republican primary voters. But tellingly, it’s also a set of issues for which the ‘‘deal’’ — that is, Trump’s unique ability to make deals — can be presented as his crucial promise. . .
It’s easy to dismiss Trump as a loutish ignoramus who simply doesn’t understand how modern economies function. But I’ve come to see him as a canny spokesman for a different sort of economy, one that often goes by the technical name ‘‘rent seeking.’’ In economics, a ‘‘rent’’ is money you make because you control something scarce and desirable, whether it’s an oil field or a monopolistic position in a market. There is a bit of ‘‘rent’’ in nearly every transaction. When you pay rent on an apartment, some of the money is for the value the landlord has added to the property, by upgrading the kitchen, say. But much of the money your landlord makes comes from the fact that he or she controls property in a desirable location. If you think of the transactions that make people the most frustrated, they are, most likely, rent-seeking transactions in which some force is imposing a better ‘‘deal’’ for one party. Your cable service costs more and is less responsive because local monopoly allows the company to make a better ‘‘deal’’ for itself. The owner of the local pro-sports team can make a ‘‘deal’’ with the city for a new stadium, or else the team packs up and leaves town. Without real competition, one or both sides of a rent-seeking transaction lack leverage, and so decisions can be hashed out only by powerful people making deals in back rooms.
I learned a great deal about rentier economies, as they’re sometimes known, when I spent a year in Baghdad, covering the American occupation of Iraq between 2003 and 2004. I met many of Iraq’s leading businesspeople, and they always talked about ‘‘deals.’’ As one explained to me, there would be some business opportunity — building a hospital, say, or getting a license to import a new line of cars — and Saddam Hussein’s family would essentially auction off the opportunity to the handful of wealthy businesspeople whom they deemed trustworthy. Success came not from being better at building hospitals or more efficient at importing cars. It came from understanding the internal family politics of the Husseins and the power of the state bureaucracy.
As an economic journalist, when trying to explain the idea of rent-seeking, I have always used one quintessential example from the United States — a sector in which markets don’t function, in which excess profits are held by a few. That world is Manhattan real estate development. Twenty-three square miles in area, Manhattan contains roughly 854,000 housing units. But there are many more people than that who want to own property there. A Manhattan pied-à-terre has long been a globally recognized sign of wealth and status — especially in recent years, as billionaires the world over have come to see a Manhattan condo, even one rarely visited, as a vessel for laundered wealth or a hedge against political upheaval at home.
Manhattan real estate development is about as far as it is possible to get, within the United States, from that Econ 101 notion of mutually beneficial transactions. This is not a marketplace characterized by competition and dynamism; instead, Manhattan real estate looks an awful lot more like a Middle Eastern rentier economy. . .
But this descent into a rentier economy would only accelerate with a mentality like Trump’s in the White House. The native-born population of the United States is aging rapidly; without immigrants the nation would quickly face a disastrous level of debt. Middle-class workers may be struggling now in a changing economy, but a clampdown on global trade would only make that worse. Any health care reform that revolved around the president’s ability to ‘‘deal’’ would inherently be one more prone to corruption. In a rentier state, every ambitious person knows that the way to become rich and powerful is to grab the sources of wealth and hold onto them, by force if necessary. It’s no accident that, around the world, rentier states tend to be run by unelected dictators — the ultimate dealmakers in chief.


Anonymous said...

There is noting that Trump will not "deal" away if it gets him what he wants.

That includes gun rights!

Anonymous said...

Trump has thrived a on progressive ran code model, the ultimate rent based economy -where control by government is "rented" with bribes, kickbacks, and donations.

Trump openly admits to one, and thinking people know that one is the same as the others, only differing as a matter of degree.

Trump supports the communist idea of a progressive tax code. Why? Because he the ultimate INSIDER. He was BORN into it, an insider from birth. Silver spoon? Try platinum.

This is why Trump has run a campaign of Projection. He cannot run on truth, or he would be exposed as the progressive liberal Marxist that he IS.

Which is worse, that he is doing so or that the Citizenry is so foolish as to buy into the same trite dishonesty that every campaign has waged for a century?

Anonymous said...

Mike -- Care to weigh in on Trump's 2nd Amendment position?

ahe3 said...


Much respect for you and sincere concern for your health. I agree that Trump is not the ideal candidate for our cause, but I am having trouble seeing how any of the available options have any chance of winning against the 47% crowd, occupy wall street professional protesters(essentially bums), the pro-immigration Hispanic bloc and the African-American(95% Democrat)voters. I supported Rand Paul, voted for Cruz in the primary and am now at a loss, except for Trump. I agree that he is not a "conservative", but can only hope that his desire to win election(and re-election) will force him to play to the right. The gun rights supporters are, in my opinion, the largest force in the anti-Hillary coalition. As a 50-ish aged voter, I am seriously contemplating my options, and they are extremely limited. I agree with Trump and Cruz that a brokered convention, that tries to end-run Trump will be a disaster. He is the first candidate on the Republican side since Reagan, that is attracting middle class, white Democrats, Independents and those who have given up on the electoral process. I have serious concerns, but I am beginning to think that we need to come together behind the strongest candidate(Trump) and hope for the best. We know what we get with Hillary, and honestly, I don't see Cruz or Kasich(or Ryan, etc...)doing any better than McCain/Romney in the general election. I value and would like to hear your response. Thanks and prayers to you and yours!

Anonymous said...

My understanding of what makes a political insider, at least in America, and most likely elsewhere, is being under AIPAC's thumb, and possibly having previously, or be willing to go through some sort of initiation process. I don't know what that might be, but based on what we've seen in the past, it could be something like taking money from them, and/or a trip to Israel to pledge allegiance to the Western Wall of Jerusalem, I don't know. But how DID we end up with so many dual-citizens in govt. positions, anyway? It might not be a bad Idea to take a different approach this time around and examine the things that got us into the horrible, pre-3rd-world conditions that have completely undermined what this country once was, and stood for.

Trump is probably not the best guy for the job, but, what are the options? Vote for another power-hungry, career politician whose only objective is re-election, even if that means selling We The People out again, in favor of making the money-powers happy?

The salaries in Washington are a little too steep to expect to attract real Americans who care about the country rather than money and power. Why govt salaries aren't capped at $50k to deter the undesirables, is beyond me.

Anonymous said...

I don't think I'd rely on opinion from the New York Times these days - witness, from this article:
"The native-born population of the United States is aging rapidly; without immigrants the nation would quickly face a disastrous level of debt."

That is pure and unadulterated agenda driven BS.

Anonymous said...

CarnivalBarkingPiedPiperRossPerotReduxHelpElectHillary 2016 !!!

Anonymous said...

"" looks pretty damn reasonable to me, Mike.

Anonymous said...

This is summarily lost on the TrumpCHUMP supporters of the oranged faced closet leftist called Trump. My Brooklyn born Irish Catholic Constitution loving instincts tell ME that they, generally, too have a light weighted understanding of the United States Constitution as well, and more that any one candidate can "fix" all the desperate problems the rest of us WILL eventually be left to deal with when the SHTF and we're ultimately and finally thrown into complete social and economic chaos that the former will own as much as the leftist/s. Say what you will about "polls", but the fact is modern statistical sampling has reached an arguably high level of sophistication. And unindicted, which seems likely, rodham clinton CRUSHES Trump in the general election. I don't give a damn WHAT the likes of a Breitbart claim.

I continue to support Cruz, although with a realistic sense as to the extent as to what can be accomplished inn the aftermath of a CREEP such as bh0bama in every way I can find. But, IF it once again becomes the that willful morbid ignorance grips this dazed, confused, duped, punch drunk electorate I will hold YOU the TrumpChumps also personally responsible for validating one rodham clinton. Promise.

Chiu ChunLing said...

As technically accurate as this description of "rent" and "rent-seeking" is, there is more than a whiff of Marxist-leaning suggestion to it. An honest economist, explaining rent, will always mention that scarcity is the only reason we ever pay for anything, regardless of how inherently valuable or costly it may be...because if there is really an unlimited supply of it, even if it was created by expenditure of vast resources and labors and is essential to all our highest and most profound aspirations, we'll take it for granted because it will be granted. In the most fundamental sense we cannot pay for such goods in any meaningful sense. The theological implications of this aren't really the point, though they obviously exist.

Understanding the implications of a complete lack of scarcity of an available good is essential to understanding the role of natural scarcity in real economies, and understanding what constitutes natural scarcity is essential to understanding rent-seeking, the effort to artificially impose or increase scarcity beyond what is natural. This fellow says, "Twenty-three square miles in area, Manhattan contains roughly 854,000 housing units. But there are many more people than that who want to own property there." And then continues in a discussion of artificial scarcity as if the fact that Manhattan is an island with a fixed geographical boundary is as artificial a condition as the machine politics and nanny-state policies of NYC.

Comparing limitation of immigration by culturally hostile aliens during the middle of a global conflict to rent-seeking...that really tells us all we need to know without any subtlety. But sometimes I just have to show off how clever and subtle I am.

Trump isn't a good candidate because he is just running a false-flag political campaign designed to make Republicans look bad. Focus on that, and stop throwing masses of uncooked spaghetti at him. Of course, when you accept the real problem with Trump you have to confront the problem of a lack of credible candidates willing to embrace "toxic extremism" as defined by the left's parody of conservatives.

Anonymous said...

Trump has clearly stated he completely supports the 2nd Amendment. He is the only candidate who hunts and currently has a CCW and packs heat. Your failure to back Trump will lead to a Clinton victory as there is no other candidate who can defeat her. You lie to yourself at your own peril.