The Austrian

Grading Trump’s Economic Policy


Donald Trump has announced his economic advisory team and unveiled a preliminary broad brush economic program that his prospective administration would implement. He has promised to fill in the details of his America First Economic Plan as the election approaches. So how should we grade his choice of advisers and his economic plan at this point?

Trump’s thirteen-man economic advisory team has more current or former CEOs (4), more billionaires (5), and more guys named Steve (6) than it does former academic economists with a PhD (1). And the lone academic economist, Peter Navarro, while a Harvard PhD is a faculty member at the University of California at Irvine, hardly an elite institution. As the title of one article harrumphed, “Trump’s economic team has a lot of billionaires, very few economic experts.” But this, of course, is all to the good.

Although economist Navarro is very well published, his ten books are written primarily for popular and investor audiences and most of his specialized articles were published in business and policy journals aimed at business professionals and policymakers rather than his fellow academic economists. He has never published an article in a top economics journal, although he has co-authored a book about US economic policy with R. Glenn Hubbard, the prominent Columbia economist and former chief of the Council of Economic Advisers under George W. Bush. Of late, Navarro has been a one-note economist who takes an old-fashioned protectionist stance on international trade, especially with regard to China. He favors a crackdown by the US government on China’s “unfair trade practices” such as export subsidies, currency manipulation, and intellectual property theft. Between 2008 and 2015 Navarro wrote three luridly titled books and produced a low-budget Netflix documentary about the economic and geopolitical risks posed by China.

Now the absurd and counterproductive China bashing and raw protectionism of Trump, Navarro and some others on the Trump team should be roundly condemned. However, there are two good things about old-fashioned protectionists. First, their naïve fallacies are easy to refute and, second — and maybe more important — they tend to be anti-globalists who reject phony multilateral “free trade” deals. These deals are opaquely crafted by design, run to thousands of pages, and mainly benefit US politicians and bureaucrats and their allied bankers and crony capitalists. And, indeed, Navarro and Trump passionately oppose the Trans-Pacific Partnership agreement, NAFTA, CAFTA, and the South Korean Free Trade Agreement.

Now, simple unilateral free trade — legally guaranteeing the right of domestic residents to freely trade with a resident of any foreign nation regardless of its trade regime — is always the ideal policy for a nation from the point of view of justice and prosperity. However, the nineteenth-century style bilateral trade “deals” that a Trump administration promises to negotiate with other nations are much more transparent and more likely to produce movement toward genuine free trade than the secretive and labyrinthine deal-making that characterizes modern multilateral trade agreements. One need only think of the great Anglo-French treaty of 1860 negotiated by the classical liberal free-traders Michel Chevalier of France and Richard Cobden of Great Britain.

Trump’s America First Economic Plan also deserves some applause. It is true the plan seems to take only a modest step toward lightening the burden of taxes on the long-suffering American middle class and freeing US business from increasingly onerous taxes and regulations that are choking off capital accumulation and growth in labor productivity, but it is a movement in the right direction. More important is the populist anti-globalism theme that pervades the document, because it clarifies and changes the entire tenor of the debate on US international economic policy. For no less than old-fashioned protectionism, genuine free trade is also a populist, America First, anti-globalist policy.

Both policies are represented by their supporters as the proper means for promoting the welfare and prosperity of American consumers and workers. Unfortunately, since the Bretton Woods conference in 1944, the genuine free trade position has not gotten a fair hearing among the American public. The reason is that the term “free trade” has been co-opted by advocates of an alien, globalist doctrine that has very little to do with promoting the economic welfare of ordinary Americans and everything to do with centralizing control of international trade, investment, and monetary affairs in the hands of US and foreign political elites.

Consider that post-World War II multilateral economic agreements and supranational organizations (GATT, WTO, IMF, World Bank, NAFTA, EU, TPP) are all explicitly aimed at “coordinating” and collectively “managing” economic activities among nation-states. As Murray Rothbard insightfully wrote about NAFTA: “What the Establishment wants is government-directed, government-negotiated trade, which is mercantilism not free trade. What it wants also is institutions of internationalist super-government to take decision-making out of American hands and into the hands of super-governments, which would rule over Americans and not be accountable to the American people. … [NAFTA] is worse than open socialism; for it’s international socialism camouflaged in the fair clothing of freedom and free markets. Populists, even protectionist populists, are right to view it with deep suspicion.”

Trump’s economic team and economic plan also merit praise for whom and what they exclude: orthodox macro-economists and their relentless and profoundly fallacious promotion of the Federal Reserve and its ultra-Keynesian policies aimed at stimulating spending, as the panacea for the serious problems afflicting the US economy. As noted above, the Trump team includes only one academic economist, and a heterodox one at that. Aside from its flawed trade policy, the Trump plan is broadly consistent with sound classical Austrian economics and focuses on cutting taxes, spending, and regulations and balancing the budget. While the plan is unfortunately silent on how a Trump administration would deal with the Fed and what monetary regime it would pursue, it is refreshingly free of any endorsement of the current Fed’s unconventional techniques for endless money creation, which redistributes real wealth and resources from productive Americans to parasitic financial firms and other capitalist cronies.

In sum, pending further details, I assign a tentative grade of C+ to Mr. Trump’s performance in economic policy. But I am a notoriously easy grader who gives students multiple opportunities to earn extra points and increase their grades, so if Mr. Trump adds items to his plan dealing with “auditing the Fed,” or “subjecting the Fed’s budget to Congressional appropriations,” or “considering the gold standard as a monetary alternative,” I will gladly raise his grade to a B.

Joseph T. Salerno is professor of economics in the Lubin School of Business of Pace University in New York. He is editor of the Quarterly Journal of Austrian Economics; Academic Vice President of the Mises Institute, and Director of the Mises Institute Fellows Program. Contact: email.


Joseph T. Salerno, “The Good Thing About Old-Fashioned Protectionism,” The Austrian 2, no. 5 (September-October 2016): 7–9.

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