The Juggler

Understanding Trump's Economic Moves

What on earth are they doing? In an age of universal stupefaction, there’s perhaps nothing more stupefying than Trump’s economic plans and moves. When I opened The Financial Times website this morning, I was greeted by the headline “Donald Trump’s crypto project netted $350mn from presidential memecoin.” Bloomberg leads with "Trump’s On Again, Off Again Tariff Strategy Sows Confusion.” A little below that: “Bitcoin Pares Losses as Selloff Sparked by Trump Order Subsides.” The top of the Times reads, “Trump’s Policies Have Shaken a Once-Solid Economic Outlook.”

Shortly after the election, the choice of Wall Street hand and George Soros apprentice Scott Bessent for Treasury Secretary made markets euphoric, especially after he called tariffs a “negotiating tool,” suggesting negative market reactions might temper their implementation. He then said this exuberance meant that financial markets expected an economic boom. Yesterday, he defended the tariffs even in the face of a massive sell-off, saying that “Main Street” not “Wall Street” was the priority for the administration, that “Access to cheap goods is not the essence of the American dream,” and the tariffs were there to reengineer the American economy away from foreign dependence. Precious few economists (none, really) believe that trade barriers can turn what is now a service economy back into a manufacturing one. But it sounded like the chips were down. Then Trump reversed them again, as Howard Lutnick announced that the provisions of the North American Free Trade Agreement, or NAFTA, would essentially stay in place. This is reversal number two now.

Trump was elected on “being good on the economy” essentially because he was rich and people figured that they’d make him rich, but he seems so determined to unsettle investment prospects and upset markets that some see a deliberate plot to destroy the United States economy. Businesses need some expectation of normality to make decisions about hiring, capital expansion, and inventory. The only thing wrong with the plot theory is that it’s too coherent: it suggests some underlying rationale. Might I humbly suggest that Trump’s beliefs about the economy are confused and not terribly well thought-out? There is already one contradiction in the coalition: on the one hand, you have Silicon Valley pushing an insane anarcho-capitalist agenda and then you have national populists hoping for a welfare state but just for white folks. They may just be tasked with an impossible job.

Here’s one theory: Far from being “good on the economy,” there’s a lot of evidence that Trump is basically incapable of understanding abstract entities like “the market” or “the economy.” His entire notion of the world comes down to personal relationships and he personalizes every concept and event. If the market goes down, someone is trying to screw you, personally. If it goes up, and you benefit, it’s because you’re smart. Many commentators are pointing out that he’s establishing something like a patrimonial or personalist regime, which replaces the impersonal rationality of bureaucracy with a network of personal ties and loyalty.

His entire business is based on the notion that his touch is what counts: his brand, and, before that, his businesses worked through what I’ve called “personal arbitrage,” basically leveraging the advantages of an entrepreneurial small businessman against large, impersonal institutions like big banks, financial markets, or the state, which have consistently mispriced the value of his assets. It’s easy to understand why he’d come to the conclusion he’s got some special sauce: if you’ve been counted out so many times and then come back, you might start to think you have some kind of magic power to pull things off, too. He and many of his followers believe he can resolve all contradictions and problems through the sheer fact of his charisma, which, not for nothing, sounds like what a demented dictator and his acolytes believe.

Trump’s big thing is the deal, which is essentially a personally worked-out negotiation, an arrangement, a cut-out. He understands the economy as a series of exceptional situations, not as some machine or abstract system that has a regular logical progression. As a result, he is willing to grant exceptions and cut-outs to keep things going: this business will get this treatment, that guy will get this, and so and so forth. During his first term, firms and business leaders who had personal ties to Trump saw a clear advantage. As the authors of one study in the Journal of Financial Economics wrote:

We find that pre-existing network relations with Trump generated abnormal returns of 3.7% over a 21-day post-election period. We also demonstrate a number of real economic benefits enjoyed by connected firms. In the post-election period, firms with presidential ties performed better, received more government contracts, and were subject to more favorable regulation than nonconnected counterparts.

“But that’s corruption!” you might exclaim. Well, it’s sort of corruption raised to a philosophy of governance. As the authors explain:

Financial and economic benefits accrued to firms in the president’s network may be viewed by his detractors as evidence of cronyism or corruption. The president’s supporters, however, would argue Trump is merely resolving information asymmetries between policymakers and the private sector, by virtue of his extensive industry background.

Of course, at scale, this all adds up to a gigantic mess. Can the economy run as a 350 million little exceptions, cut-outs, and breaks given? We’re gonna find out, but the inexorable logic of capitalism will reassert itself somewhere and somehow. Every small merchant knows that when you try to corner the market, the product seems to miraculously appear somewhere else.

The recent chaos in the economy also brings to mind a historical analogy. No, don’t worry, it’s not that one. This one comes from the greatest piece of political journalism ever written, The Eighteenth Brumaire of Louis-Napoleon by Karl Marx. It’s the story about how a corrupt, vain, and apparently quite incompetent and stupid old roué managed to take over a proud democratic republic and turn it into a personal trough for himself and his gang. Everyone cites the famous lines at the beginning: the part that goes “first as tragedy, then as farce,” but I’m thinking of the part of the end, where Marx describes the social and economic magic trick Napoleon needed to pull through decrees: “Driven by the contradictory demands of his situation, and being at the same time, like a juggler, under the necessity of keeping the public gaze on himself, as Napoleon’s successor, by springing constant surprises – that is to say, under the necessity of arranging a coup d’état in miniature every day – Bonaparte throws the whole bourgeois economy into confusion… produces anarchy in the name of order, while at the same time stripping the entire state machinery of its halo, profaning it and making it at once loathsome and ridiculous.” Well, that certainly sounds familiar!

So does this passage:

The contradictory task facing the man explains the contradictions of his government, the confused and fumbling attempts to win and then to humiliate first one class and then another, the result being to array them all in uniform opposition to him. This practical uncertainty forms a highly comic contrast to the peremptory and categorical style of the government’s decrees, a style faithfully copied from the uncle.

Industry and trade, i.e., the business affairs of the middle class, are to flourish under the strong government as in a hothouse. Hence the grant of innumerable railway concessions. But the Bonapartist lumpenproletariat is to enrich itself. Hence fraudulent manipulation of the Bourse with the railway concessions, by those already initiated. But no capital is forthcoming for the railways. Hence the Bank is obliged to make advances on the railway shares. But the Bank must simultaneously be exploited by Bonaparte, and therefore must be cajoled…

And, for that matter, so does this description of Napoleon III’s ministers:

A gang of shady characters pushes its way forward to the court, into the ministries, to the chief positions in the administration and the army. Of even the best of them it must be said that no one knows where they come from. They are a noisy, disreputable, rapacious crowd of bohemians, crawling into gold-braided coats with the same grotesque dignity as the high dignitaries of Soulouque’s empire.

Marx’s prediction that the contradictory economic picture would be Napoleon III’s downfall: he eventually would drop one of the balls he was juggling. Of course, Marx’s record with predictions is a bit spotty. The regime lasted 18 years, until it ignominiously collapsed when he was baited into a stupid war with a much more devious neighbor. And it was not all ludicrous corruption: he expanded and rationalized the civil service, infrastructure and industry boomed, he negotiated free trade agreements with his neighbors, and he protected workers’ right to strike. It had both reactionary and progressive elements. In many ways, France flourished under the Second Empire. I think something like Napoleon III, a sort of developmentalist, strict, but not totally monstrous authoritarianism, is what some of his middle-class supporters want. (It’s a bit strange because we are already a developed country. ) “Okay, yes, there’s corruption, but look at all the beautiful boulevards!” I think with Trump we are getting something much more like the Napoleon III of Marx’s pen. Plenty of corruption, but no beautiful boulevards and parks to show for it.