Governments that meddle and micromanage private businesses end up like Venezuela.
In 2010, Venezuela’s president Hugo Chavez was in full-expropriation mode. Chavez would ‘nationalize’ foreign companies, often on trumped-up charges, leaving the legal owners with little recourse. He famously walked around the Bolivar Plaza in Caracas, pointing at businesses stating, “Expropriate it, expropriate it!”
It’s 2016 and Donald Trump is in full-intimidation mode. As Trump pursues the ‘nationalist/populist’ part of his confusing, multifarious policy on trade, he is engaging in the same type of anti-capitalist behaviour reminiscent of Hugo. Last week it was Carrier; this week it’s Rexnord; next week, who knows?
Trump’s deal with United Technologies includes $7 million in financial incentives provided by Indiana to keep 1,100 jobs at Carrier, the company’s heating and air conditioning unit, in the state. However, Carrier still plans to move roughly 1,300 other jobs to Mexico and close another facility in Indiana.¹
Those of us who had to support Trump, to at least have a chance of avoiding the tired socialism, deep corruption and wide cronyism of Hillary Clinton, knew at some point this ‘nationalist/populist’ enigma would eventually have to be addressed. Along with financially punishing companies that want to set up shop abroad, Trump’s policies could potentially include tariffs and quotas on imports, domestic or foreign.
There are good aspects to Trump’s trade proposals which makes these aspects all the more annoying: lowering the corporate tax rate and allowing monies to return to the US from foreign holdings without triggering large tax liabilities. But Trump’s refusal or inability to go full-free-market-capitalist is worrisome; the last thing we want to see is Trump walking down Fifth Avenue, pointing at businesses shouting, “Penalize it, penalize it!” simply because they might want to move operations overseas or add another country to their business model. Governments that meddle and micromanage private businesses end up like – well, like Venezuela².
The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another. [Milton Friedman]