The wrecking ball that President Trump used to take down the global trading system has two other targets: the democratic governing system devised by our Founding Fathers and the market capitalist economy that has produced the greatest material wellbeing the world has ever seen.<\/p>\n
We were once a nation in which millions of consumers interacted with millions of producers to set prices for the nation\u2019s and, far less perfectly, the world\u2019s resources. Not every nation was so blessed. Some had rulers that wiped out tens of thousands to establish their control of their nations\u2019 resources and employ them pursuant to a vision of the future that did not include \u201cliberty and justice for all\u201d. Think Robespierre, Lenin and Stalin, Mao and now Xi. <\/p>\n
Trump does not rank with those monsters. But neither is he willing to allow markets \u2014 the interaction of buyers and sellers \u2014 to set prices and allocate resources. Never mind that consumers are sufficiently satisfied with the way that Walmart prices the 120,000 products on its shelves to make it America\u2019s biggest retailer. Now Walmart has to take account of Trump\u2019s warning to \u201ceat the tariffs\u201d rather than raise prices, and he knows where they vend. <\/p>\n
\u2022 Trump threatens tariffs on big pharma \u2018at the end of the month\u2019<\/a><\/p>\n The president orders his health regulators to \u201ccommunicate price targets to pharmaceutical manufacturers\u201d. He warns Mattel that if it raises prices it will face 100 per cent tariffs and \u201cwon\u2019t sell one toy in the United States\u201d. Amazon is told that raising prices will be considered a \u201chostile and political act\u201d. Take that Milton Friedman. <\/p>\n There\u2019s more. In Trump\u2019s America, regulatory policy is set by a man whose personal and family\u2019s pecuniary interests<\/a> are affected by those policies. Fiscal policy is determined by a man who seems to be tolerant of rising deficits in an already debt-laden economy. This at a time when a growing economy should be paying down debt or, at minimum, reducing deficits. So far, those deficits have resulted in a weaker dollar and a possible threat to its status as a reserve currency. Eventually, they will result in the higher interest rates Trump so abhors. <\/p>\n Combining limitless self-confidence with limited understanding of economics, the president is trying to wrest control of monetary policy from the independent Federal Reserve Board. At a time when the prices of tariffed items such as furniture, clothing, appliances, toys and imported fruits and vegetables are beginning to rise, he would lower interest rates by at least two full percentage points. The Fed chairman, Jerome Powell<\/a>, is the unfortunate public servant who stands between Trump and his goal of the negative real interest rates that his proposal, combined with inflation, would produce.<\/p>\n \u2022 Trump has to deny he was about to fire \u2018knucklehead\u2019 Fed chief<\/a><\/p>\n The danger of the president\u2019s economic management is matched by what might prove to be a more serious, because more durable, attack on the democratic governing system. Trump can sense ends that will justify his means. Interference with university selection of staff is seen as necessary to force elite institutions to crack down on antisemitism. The constitution reserves law enforcement to state and local government but when those agencies are unwilling, or unable, to contain violent protesters, Federal forces move in. Impinging on states\u2019 rights is necessary to get genetic men out of women\u2019s sports. Dangerous means are accepted in pursuit of desired ends. <\/p>\n And yet, and yet \u2026<\/p>\n Despite the dangers of allowing Trump to replace markets, and to ignore constitutional constraints on his power, there is a discernible bubbling up of optimism. You know the outlook is brightening when Jamie Dimon, the chief executive, says JPMorgan Chase economists have dropped their recession prediction. You know it when chief executives\u2019 confidence rises, and they commit billions to America\u2019s future, to assure it is the leader in AI and other technologies. You know it when 70 countries troop to Washington to negotiate continued access to the world\u2019s largest market. <\/p>\n