Trumpian Economics: Pro-Business for the Short Run

Trump’s populist message quickly morphed into a corporate dream with the selection of the wealthiest cabinet in American history. Photo courtesy of The Freedom Frog.

Written by Aldo Gonzalez

Just like the 17 other Republican candidates, President-elect Trump grabbed the Reagan flag of limited government and waved it furiously, ensuring a renewed era of market-driven growth. However, this promised era may only present the façade of pro-market policies. For, just like the beloved Ayn Rand who prioritizes personal gain over real economic growth, Donald Trump may only care for the growth of a business’s bottom line, no matter the repercussions.

Before delving further, I would like to establish that it is no secret that government regulation is often followed by disparaging remarks or silent indignation. As with anything else in life, there is both good and bad regulation. Government has a dual-edged record of failing on the regulatory side, accompanied with a history of successes.

In many ways, free markets rely on regulation that cultivates a fair and competitive business environment. Government regulates which merger is valid, preventing those that might grant an entity overwhelming market share. Likewise, the Securities and Exchange Commission’s sole mission is to protect investors while maintaining efficient and orderly markets that facilitate capital formation.

Key characteristics of the free market depend on regulation. With this in mind, Trump’s populist message quickly morphed into a corporate dream with the selection of the wealthiest cabinet in American history. It is quite clear to economist Luigi Zingales that Donald Trump favors business over an orderly and efficient market. Zingales argues that a pro-business policy does not care for robust markets as long as the bottom line benefits in the short run.

There is a clear disregard for government institutions and the regulatory goal they intend to achieve in Trump’s paradoxical appointment for the SEC, a former Wall Street lawyer adept at defending banking institutions accused of fraud; and for the State department, an Exxon executive with questionable relations to Russian interests.

Do not be surprised if Trump’s presidency produces a detrimental environment with a poor market outlook. Economic stagnation, labor protests, and protectionism might become the status quo of the next four years.

As Republican leadership begins to pursue tax reform, promised by Secretary Mnuchin to be completed by August, we will gain a clearer picture of what kind of economic reality President Trump wishes to construct.

 

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