Listening to Donald Trump’s remarkable “thank you” speech on December 1 in Indiana, I was struck by how well-honed the president-elect’s worldview seems to be—particularly in relation to economic statecraft. During that speech, Trump elucidated why and how America would conduct its trade deals.
Trump’s recent pre-presidential victory in preventing the Carrier Corporation from uprooting in Indiana and moving shop down to Mexico was an excellent case in point. Using a combination of economic carrots and sticks to entice the firm to remain in place, Trump achieved what everyone from Jeb(!) Bush to Barack Obama said was impossible.
Why, apart from his pledge to keep American jobs in America, did Trump do this?
He did it because he understands that the loss of the factory would not be just a sad day for Hoosiers. It would represent more irreparable harm to America’s ailing working class—the very backbone of America’s economic and, therefore, military might. The continued losses of this group of people do a strategic disservice to the United States.
Trump rightly recognizes the strategic implications of America losing its manufacturing capabilities. After all, it was manufacturing that helped to win the Second World War. While America likely will never return to that level of manufacturing output, or to that level of mechanical competence among average Americans, the fact is that much of our potential in these areas has been squandered not simply because there were more lucrative alternatives, but also because American leaders have demonstrated a lack of strategic foresight.
While many of the more dogmatic free trade purists decry what they call Trump’s “crony capitalism,” I think they are missing something. Indeed, as Trump critic Greg Weiner argues, capitalism is best characterized by “decentralized economic decisions.” Crony capitalism is most often understood to be the union of interests between the state and certain private industries. Essentially, it is the centralization of economic decisions. As such, there is some question as to whether one can even use the term “capitalism” after the term “crony.”
The term “crony capitalism,” therefore, is just a bastardization of what capitalism really is (which is why the Left loves using the it). Indeed, a more apt term for “crony capitalism” would be either “corporatism” or “mercantilism.”
But this is not what was at work in the Carrier deal. The Carrier deal, instead, shows how Trump will enact his economic statecraft policy. For those companies already here, Trump is signaling—through persuasion—that he will do what it takes to keep them in place. He goes to them to find out what is necessary to achieve that and he offers what he can. He also promises to enact penalties where he can, of course. But Trump is limited here by the Constitution and by political reality. Still, companies may be uncertain about his limits. If they seek to err on the side of caution in ways that help American workers, so be it. That’s smart politics.
Once in office, he will seek to lower taxes and reduce regulations, which—in addition to keeping companies here—will also entice more businesses to open up shop in the America. This influx of entrepreneurial activity will increase America’s strategic capital on the international stage. While it may be heresy to the Free Trade purists over at Cato and the crony “capitalists” in the Democratic Party, Trump’s economic warfare doctrine seems to be predicated upon making America so economically strong, and so attractive for businesses, that no other country could ever use economics as a cudgel against the United States again and no sensible American company would want to relocate.
Gonzo geopolitical analyst Edward Luttwak recently observed this shift to economic warfare, or resisting China’s rise through geoeconomics in his most recent book on Chinese grand strategy, The Rise of China vs. the Logic of Strategy. As Luttwak writes:
China’s continuing rise ultimately threatens the very independence of its neighbors, and even of its present peers, it will inevitably be resisted by geoeconomic means—that is, by strategically motivated as opposed to merely protectionist trade barriers, investment prohibitions, more extensive technology denials, and even restrictions on raw material exports to China if its misconduct can provide a sufficient excuse for that almost warlike act.
Trump has recognized repeatedly the threat that China’s aggressive economic posture poses to American national security. His recent phone call with the Taiwanese president highlights the ways in which he intends to put pressure on China and to slough off our own supine neglect of our interests.
Trump’s economic counterattack against America’s true rival, China, is just beginning. This, coupled with his threats vis-à-vis tariffs on incoming Chinese goods (lest they operate more fairly in the economic realm) is nothing less than audacious. It is a Patton-esque strategy for winning the ongoing economic war with China. Trump is very Chinese in his view on grand strategy.
True statecraft is not limited to the use of the military or traditional diplomacy only. It also involves economics. An offensive, audacious, economic warfare strategy is therefore needed to protect America’s interests globally. Donald Trump will take a page out of China’s book and use it against them. In Trump, the successful Art of Economic Warfare will be on display. As such, we will not only be safer, but also far more prosperous.