What a Dictator Does to an Economy

by | Feb 13, 2019 | Economics

It is not for the president or any politician or regulator to issue dictates telling individuals or businesses where and what and how much to invest, much less what to say

The US president has rightly denounced Venezuela’s Nicolas Maduro as a dictator who violates the “rule of law” and has ruined that country’s economy through arbitrary rule over its business sector.

Good. Now let’s apply that principle closer to home.

“They better damn well open a new plant there very quickly,” announced the US president in late 2018. The words are ominous because they cross a boundary that should not be crossed. The president does not own nor is he the CEO of every business in the country. He should not bear liability for their failures nor credit for their successes.

This is the way a strongman talks. The president’s proper domain concerns the administration of government, not a country’s businesses.

Those coarse words were uttered to threaten and intimidate General Motors for its decision to close several unprofitable automobile plants in the American Midwest. The president wants General Motors to build a new plant in Ohio to replace the ones it is planning to close in that state and two others.

This is just a recent example from a president who, through threats, intimidation, and unilateral executive action like the imposition of tariffs, is working hard to bring American businessmen to heel. Some of Trump’s policies are already quite effective in doing so. US tariffs have reduced businessmen to beggars, who have to petition Washington for endless exemptions simply to operate their businesses.

A ruler cannot stand any form of independence — whether in words or action — and neither can the president. He has excoriated iconic American businesses ranging from Harley Davidson to Amazon for decisions he doesn’t like, such as providing a forum for what he calls “fake news” or opening up a motorcycle factory abroad.

Disturbingly, he saves special ire for those who speak against him. He has called the media the “enemy of the people.” He once laughed and praised a Republican congressman for assaulting a reporter. And he has regularly expressed admiration for Vladimir Putin, even when reminded that Putin likely ordered the murder of numerous journalists in Russia.

He disagrees with the editorial policies of Google and Facebook, so he has variously threatened to break them up using antitrust laws or to turn them into soul-less and profitless utilities controlled by the government. The president saves especial ire for Jeff Bezos, the incredibly successful entrepreneur who founded Amazon, because Bezos also owns the Washington Post newspaper, which is critical of him. He has floated creative new ways of punishing Amazon, from breaking them up using antitrust to just ordering the monopoly US Postal Service to hike its rates for Amazon.

The president rightly chastised Nicolas Maduro for violating the “rule of law.” A ruler cannot stand any independence in his subjects, in thought or in action. Yet sometimes the president acts like one. He seeks equally to control the body and the mind, the material realm of business and the intellectual realm of speech.

Fortunately, a Jeff Bezos or a New York Times can stand up to him. But many others, such as the businessmen begging for exemptions from arbitrary tariffs, are already at his heel.

We need to think of the future. At some point, the president will be out of office — whether he gets another term or not — before what could be called a dictatorship comes to America. The US is nowhere close to Venezuela in the degree of imposition. However, his policies, to the extent they are unopposed, will have greased the skids for it to happen here. The president has laid down the gauntlet, and Americans are doing nothing. As a result, the next president will have an easier time of imposing his or her will on all of us.

It is not for the president or any politician or regulator to issue dictates telling individuals or businesses where and what and how much to invest, much less what to say. The modern idea of freedom was born with the rise of the commercial economy and the independence of its business sector. That independence should be sacrosanct. There are lines no leader in any country should ever cross.

Made available by the American Institute for Economic Research. Visit their website at https://www.aier.org.

Raymond C. Niles is a Senior Fellow the American Institute for Economic Research. He holds a Ph.D. in Economics from George Mason University and an MBA in Finance & Economics from the Leonard N. Stern School of Business at New York University. Prior to embarking on his academic career, Niles worked for more than 15 years on Wall Street as a senior equity research analyst at Citigroup, Schroders, and Goldman Sachs, and as managing partner of a hedge fund investing in energy securities. Niles has published a book chapter and numerous articles in scholarly and popular publications.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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