Is Trump Abandoning the Free Market?

Donald Trump at the Carrier HVAC plant in Indianapolis on December 1. James Pethokoukis writes that there are always winners and losers from automation and globalization, even if net gains overall. Chris Bergin/reuters

This article first appeared on the American Enterprise Institute site.

Donald Trump on Thursday warned that companies like Carrier "are not going to leave the United States anymore without consequences. Not going to happen. It's not going to happen, I'll tell you right now."

When I heard the president-elect make that threat, I responded thusly on CNBC, calling the comments "chilling." Money manager Doug Kass was even stronger: "I believe that speech was one of the most dangerous and reckless speeches I have ever heard from a President or President-elect."

And nothing I've heard since then sounds much better. From The New York Times:

"I don't want them moving out of the country without consequences," Mr. Trump said, even if that means angering the free-market-oriented Republicans he beat in the primaries but will have to work with on Capitol Hill. "The free market has been sorting it out and America's been losing," Mr. Pence added, as Mr. Trump interjected, "Every time, every time."

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Let me focus on the Pence comment: "The free market has been sorting it out and America's been losing."

I hope this was somehow taken out of context. As a sort of general economic statement, it's terrible wrong. America isn't losing today, nor has it been losing. America is a fabulously wealthy nation that pushes the technological frontier of the global economy.

Americans overall are better off than they were a generation ago. And while America has lost manufacturing jobs, 80 percent or more of that seems due to automation rather than bad trade deals. Factory output has gone up, actually. Free trade, including NAFTA, has benefited the US economy.

Of course, there were regions hurt by the now-dissipating "China trade shock." But there are always winners and losers from automation and globalization, even if net gains overall.

Conservatives are supposed to understand the concept of "tradeoffs." Government has a role to play, everything maybe from retraining to income subsidies to relocation. And, of course, creating a better overall growth environment.

Workers have a responsibility to make sure they are preparing themselves to prosper in a modern, technological advanced, dynamic economy with no promise of lifetime employment at one firm.

After all, Trump, in his Carrier speech, said he wouldn't penalize firms for moving factories within the U.S. The goal should be an economy of maximum competitive intensity with workers helped by a modernized safety net.

But perhaps the new populist GOP has other plans. In an interview with The Wall Street Journal, Pence apparently made comments that "suggest that a Trump White House would eschew many of the free-market principles that have guided prior Republican administrations, including injecting itself into the personnel and long-term operating decisions of individual companies."

James Pethokoukis is a columnist and blogger at the American Enterprise Institute.

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