Why Trump's presidency will fail

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(Image via http://bgr.com/2016/03/03/donald-trump-usa-made-iphones/)

Trump’s inability to appreciate the multifaceted goals of government will doom his presidency, writes A J Matthews.

TRUMP'S TRACK record as an entrepreneur is not an asset for a president. In fact, his business background will undermine his ability to develop sound public policy.

Part of Trump’s political success is due to his reputation for success in business. This is the mystique behind the man created by The Art of the Deal. But Trump’s business acumen (such as it is) will arguably undermine, not enhance, his ability to become a successful president.

First a bit of background.

The deeply flawed neoclassical economic model is founded on the assumptions that any deal is entered into by rational, well informed, willing participants and that market prices for all goods and services are arrived at through competitive supply and demand forces. Where those assumptions are met, any deal will supposedly produce a win-win outcome. But how often does that really happen?

According to the theory, the product produced by any business enterprise is always worth more than the sum of its parts. Businesses “create” value out of thin air by taking various inputs (materials, labour, plant, finance, entrepreneurial know-how, etc) at their respective market prices and produce something that is worth more than the sum of all of the inputs. Everyone wins. Or so the theory goes.

This might be why some people believe success in business is a good indicator of likely success in running a government. This may have motivated many people to vote for Trump. They have an unfounded faith in the theory that businesses create deals where everyone wins and believe that’s what governments also ought to do.

Unfortunately, Trump has probably been more influenced by business strategy than economic theory.

A foundational theory of business strategy – “Porter’s 5 forces” – identifies a range of criteria that make an industry “unattractive” for doing business. These include high levels of bargaining power of buyers and suppliers (ie. rational deals freely entered by well informed participants), high level of threats of substitutes and threat of new entrants (ie. free-market competition). Basically, businesses that meet the assumptions that underpin neoclassical economics are "unattractive" for business, according to this foundational theory of business strategy.

Paraphrasing heavily, accepted business strategy says

“If you choose to run a business the way economists assume businesses run, then you are a chump.”

(Trump may be many things, but no one accuses him of being a chump.)

This has always been one of the fundamental flaws in neoclassical economics — it makes arbitrary idealised assumptions and so, at its foundation, it departs from reality.

Crucially, real world business strategies don’t prescribe or revere deals that produce a win-win outcome for businesses and their employees, contractors and customers. In business strategy (and perhaps overwhelmingly in Trump’s business strategy) a deal does not need to produce a net increase in wealth in the aggregate to be considered a great deal. It just needs the deal instigator to win!

Trump has shown a tenacious ability throughout his career to put together deals through which he profits at the expense of his customers, employees and contractors. Consider the Trump University bait-and-switch scam, endless property deals that left a trail of unpaid contractors, Trump Steaks (that was reportedly a failed enterprise that nonetheless successfully relieved Trump of a debt to a contractor of over US$715,000), or Trump’s casinos (that reportedly may have enriched Trump significantly at the expense of public tax revenues to the tune of almost $1 billion).

Ten failed Trump business ventures, published 4 March 2016.

The common factor throughout has been Trump’s ability to pursue his own interests at the expense of all those with whom he deals. He doesn’t craft a win-win outcome with net overall gain. Contractors, suppliers, customers and taxation obligations become collateral damage in Trump’s pursuit of his self-serving goals — his own financial success. And for the most part, that’s not perceived to be incompatible with Trump’s reputation as a successful entrepreneur. In fact, he considers himself to be a brilliant business man because of his ability to shaft everyone else.

All is fair in love, war and business, it appears.

Now let’s consider how valuable that background will be in informing public policy formation as president.

We can’t yet know whether Trump will pursue personal financial gain through public policy (though for many that remains a significant concern). But that is not the only way that Trump’s demonstrated behaviour pattern will lead to poor public policy.

A more subtle issue is that Trump is habituated to myopically pursuing a single-minded goal, while ignoring the downstream consequences as mere collateral damage. That’s always been someone else’s problem.

This is the antithesis of what is required for sound public policy.

The Trump Train is already off the rails. Stephen Colbert and the Late Show, 23 November, 2016

Public policy needs to work for everyone. That means governments must carefully consider all of the downstream implications of policy and legislation and to enact only policy where the net impact of all direct and indirect consequences is positive. Political leaders must balance competing goals, including managing the economy, maintaining social cohesion, achieving foreign affairs goals, negotiating successful trade agreements and honouring them for mutual benefit with trade partners, maintaining law and order, improving environmental outcomes, and many other considerations. Governments also need to achieve all this while maintaining the confidence of a wide range of interest groups, including both supporters and detractors. It’s a complex business.

The challenge of pursuing multiple simultaneous goals is something for which Trump is utterly unprepared. He simply has no background, and even lacks awareness of the scope and breadth of the role. Having essentially run a large family business, he doesn’t even bring experience in maintaining confidence of multiple shareholders while pursuing his single-minded goal of “shareholder value”.

We can already see this short-sightedness through Trump’s campaigning platform.

Trump has proposed a national register of Muslims, ostensibly as tool to fight terrorism. This ignores the fact that this policy will drive a wedge between law enforcement and the Muslim community, while simultaneously further alienating disenfranchised Muslim youth. This will increase the risk of terrorism, not reduce it.

On climate change, Trump proposes to scrap the Clean Power Plan and withdraw from the Paris Climate Agreement at the expense of downstream impacts on climate and the U.S. economy. There is ample work by the IPCC and other national and international scientific organisations that demonstrate the folly and short-sightedness of Trump’s anti-climate agenda.

On illegal immigration, Trump proposes ejecting 11 million undocumented workers, while ignoring the impact on families, American-born children and even on substantial businesses and industries that rely on those undocumented workers.

Moderate members of Trump’s own adopted party have already identified that:

“… forced deportations of millions of people would be prohibitively expensive and probably logistically impossible.”

The common thread is Trump’s inability to appreciate the multifaceted goals of government and that will doom Trump’s presidency.

As a result, we must prepare for a downstream trail of destruction of the type associated with Trump’s business dealings.

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