Donald Trump

Donald Trump is obsessed with his ability to make a “deal.” He even titled his book “The Art of the Deal.” It has become his main selling point to many American’s. He envisions himself lowering the cost of pharmaceuticals, by cutting a deal. Then the uninsured will receive health care because he will cut a deal with hospitals. Yet his greatest deal of all will be having Mexico pay $16 billion dollars to build a wall that they don’t want.

Most of Trump’s politics have revolved around the concept of “winning” (which draws a striking resemblance to a drug addicted Charlie Sheen). He has handpicked several “red meat” topics to cover, and then has stated that he will fix them with his genius deal making, without using evidence to support any of his claims. He doesn’t intend to make America great again through any aspects of the Solow Model(except population growth by building a wall, but in reality, more Mexicans leave the country every year than entering it). He is under the impression that he will increase the standard of living by “winning” whenever he cuts a deal.

Now looking at the material that’s been covered in this class it becomes apparent that cutting a good deal, is nearly impossible in the long run. A deal by its nature is beneficial towards both parties, or it would not exist. While Trump believes he will bully other countries into submission there is no evidence that anything he proposes makes sense. The key issues that affect trade between countries are not the negotiator’s charisma. The factors which make a difference include GDP, inflation, currency exchange rates, total factors of productivity, and total capital. None of the policies which he discusses in any depth would affect the factors which would give Trump leverage to make a winning deal.

Now Despite Trump’s critics beliefs, he does have an understanding of an economy. It is simply not our economy. Trump’s successes are not in trade between countries. It is within real estate. Thus, he bases his economic viewpoints on a “rent seeking” economy. This is one in which you own something that is desirable, for example, apartments, or oil fields. Now in this exchange, one person is the owner, and the other is looking to make a deal. Which gives the owner leverage, meaning they can force their will upon the deal seeker. This ends in a scenario where one person wins, the other loses. This is rather comparable to a monopolistic market.

This is a system the exists in several places, one being the middle east. In Iraq, a handful of businessmen had control over the vast majority of the economy. In this scenario, the Hussein family had all of the control, and would auction off contracts to those that they deemed “trustworthy.” So the quality of work did not matter. An understanding of the politics within the Hussein family was what made, or broke a family.

Now Donald Trump stems from one of the only areas in the American economy that this model was apt. New York real estate. In this system, there is a hereditary hold over the Manhattan area in particular. A handful of families hold control, and as a result, the rent in the area is absurd. This is because there are owners who control the supply, and there is such a large demand they cannot make a “losing” deal.

When looking at Trump’s worldview it becomes apparent that he views the world as a “rent seeking” economy. He only has an understanding of a system in which if there is a winner, there must be a loser. However, it has been argued by many economists, which prescribe to a wide spectrum of political ideology, that by reducing the rent-seeking behavior, more mutually beneficial deals can be produced, thus helping our economy grow. Trump operates on the assumption that we are a monopoly in a closed economy. We are not, if we cut trade relations with Mexico that means that we will have to increase our trade deficit somewhere else to supplement the demand. Many companies in America would lose huge investments they have in the Mexican economy. Trump is actively supporting a more oligopolistic model of the American economy. He sees the need for a deal to have a winner and a loser. But if there is a loser in a deal, that “losing” party simply won’t make the deal. Trump’s understanding of the economy is misguided, if he understood anything but real estate, maybe he wouldn’t have over 50 failed business ventures, or gone bankrupt 4 times.

http://www.nytimes.com/2016/03/20/magazine/what-donald-trump-doesnt-understand-about-the-deal.html?ref=economy&_r=0