Sunday, November 11, 2018

Globalization is a threat not an insurance

You hear it often: more trade means that we get to know each other better and that there is less chance that we start a war against each other. It is one of the main arguments in favor of free trade.

I have serious doubts about this. The first World War happened when the world was very integrated. And when the world resumed globalization after World War I it ended in the Depression of the 1930s - very much an economic war between countries. More recently we see Trump taking on China - despite huge trade ties.

The problems with trade are many:
- First of all there are the terms of trade: they are to be negotiated and that can make them quite arbitrary. Just look at the oil price to get the idea.
- A related problem is dependency: if you depend on other countries to produce certain goods for you they are in a position to blackmail you. The increasing use by the US of economic sanctions is a good example.
- The theory of relative advantage made sense in a time when most trade was about natural resources. But nowadays most trade is about industrial products. And you can place a factory everywhere. Nowadays free trade often means the advantage of the incumbent: they have the patents, the infrastructure, the skilled workers, etc. and it takes a lot of effort for a country that doesn't have that to build it up.
- Some sectors are seen as important strategically either because they are believed to be growth industries or because they are related to defense industries. If you want to be able to build tanks you better have some steel works.
- Finally there is the issue of perception. If there are problems and you are dependent on others, it is easy to blame those others. That was what we saw happening in the 1930s and that is what Trump is doing now. If the US would be self sufficient Trump wouldn't be able to blame other countries for America's economic problems.

Trade has two important functions: it allows poorer countries to catch up and it helps spreading technology. But I believe that outside that its benefits are limited.

Just imagine that the US would be self-sufficient. Trump would have nothing to complain about America's trade partners. A politician like him would be forced to focus on internal issues instead.

I believe that - when all things are equal - we should strive to localize production. It is a matter of giving people as much control over their life as possible.

The depressed president Trump

There has been lots of speculation about the psychological health of president Trump. Some Democrats would even like to impeach him as "unfit" for the job under the 25th amendment. There is even a book where 27 mental health experts discuss Trump and come with diagnoses like hedonistic, bully, sexual predator, narcissist, paranoia, sociopath and dementia. My take would be depression.

Did you ever see Trump enthusiastic? His voice is dark and monotonic. Even about becoming president he was ambivalent.

One property of depression is realism. When you ask in any organisation who is above average a wide majority will claim to believe they are - what is statistically impossible. Normal people see the world through rose tinted glasses and are often more optimistic than the facts justify. Under depression that falls away and people see reality in all its ugliness. It is that realism that enabled Trump to win the primaries and consequently the elections. He saw his adversaries in all their weaknesses and used that against them. It is also what the voters loved from him: he said things like they were.

The backside of realism is a kind of Machiavellian realism. Pretending to be better than you are works. So Trump shamelessly does so. Being demanding works too. It evades Trump that the world would be a living hell when everyone would behave that way.

Depression is often associated with a lack of energy. Trump spends much less time and effort on his job as his predecessors.

Depression is also linked to overuse of social media. Trump's addiction to Twitter certainly counts.

Depression makes on self-centered. That strengthens the narcissist tendencies that Trump already had.

Trump can be quite aggressive. That doesn't fit the image many people have of depression. However, irritability is a quite common symptom of depression.

Depression is often associated with feeling locked in by your own assumptions. Trump's conviction that the world is divided in winners and losers and that he should be a winner at any price is certainly the kind of conviction that can lock one in.

Is it good to have such a president? It depends on your view of the world. Many Republicans like it to see someone who says things like they are and acts accordingly. On the other hand: in the real world many things are quite complicated. It takes effort to understand them. And Trump isn't likely to put in that effort.