Donald Trump persuaded Carrier Corp, a maker of air-conditioning and heating equipment, to keep about 1,000 jobs in the U.S. The free market works in part because it relies on millions of individual enterprises to decide how best to employ their resources. The government's role is to protect their right to do so, and to intervene only in those cases where the market fails, when misaligned incentives lead to environmental damage, for example, or financial instability. In Carrier's case, the market was working. The company wanted to move production to Mexico to lower labor costs and remain competitive. American workers would lose jobs, but U.S. consumers and investors would get cheaper furnaces and/or better corporate earnings -- and, potentially, more spending on U.S. imports by the Mexican workers who got the jobs. This constant shifting of resources tends to boost living standards both in the U.S. and abroad, by allowing everyone to focus on what they do best. Now the company might be in worse shape than it would have wanted to prevent.
Another example is Ford Motor Co.'s decision to keep production of its Lincoln MKC sport utility vehicle in Kentucky, a move for which Trump has taken credit. The automaker had been considering moving the MKC to Mexico to make more room for the more popular Ford Escape, which is produced in the same factory. So to the extent that Trump influenced Ford, he may have done damage by preventing the company from efficiently responding to demand.
Bullying companies into making bad decisions is no way to make America great again.
Link: https://www.bloomberg.com/view/articles/2016-12-01/trump-s-carrier-victory-is-the-u-s-economy-s-loss
It is interesting that Trump can have such political pull when he has yet to be sworn in. I wonder how big his pre-presidency effect is, that is how many corporations is he intimidating from expanding or moving in the upcoming years. Trump may hurt the future of the economy before he is even in office.
ReplyDeleteI see why Trump went in to keep this company from moving because his campaign was centered around keeping jobs in the US but only time will tell if this was a smart move by keeping jobs here or if he should of let them go to Mexico
ReplyDeleteGiven the company potentially being in worst shape by keeping jobs in the U.S, what's the companies logic in negatively affecting itself just to keep jobs here?
ReplyDelete