I used to be close to a pair of senior citizens who'd retired from long, prosperous careers as bookies. And after a while I began to realize that, although they were both still extremely sharp, they were not especially good with money. They weren't catastrophes. They didn't go broke with bad investments. They just never did as well as they should have, almost never got the full value from a deal. They had both done very well in an illegal business, but they seemed weirdly unable to make an honest buck.
My friends saw business as a strictly zero-sum game, where they could only gain if someone else lost. The way they saw it, there was a fixed amount of money floating around the world, and you had to grab as much of other people's as you could. This is a perfectly accurate approach to betting on the third race. Gambling is a zero-sum proposition. One party loses, the other wins, and absolutely nothing of value is created. A fixed amount of money just gets redistributed. There is no such thing as a deal where everyone comes out ahead. You get ahead because someone else screws up. Every transaction is ultimately somebody's mistake.
What my older friends could not get their heads around, or on some level couldn't believe, is that there are deals that can make everyone involved richer, bargains that are wins for both sides because they create value. Plenty of perfectly honest people have trouble with this idea, too, and subscribe to the fixed-amount-of-dollars-in-the-universe idea. You can run a decent small business from basically that perspective. But our entire economy is based on the fact that new wealth continues to be created. The country as a whole gets richer. There is more money than there used to be, because there are more things for money to buy. (What people who get freaked out by the fact that money changes value don't understand is that it's about the relationship between the amount of money and the amount of things available to purchase with your money.)
Most business people who succeed on a large scale do so by looking for deals where everyone can profit, not because they're altruists but because those are deals that other people want to make. You can make money off deals where the other side also makes money, and everybody's happy, and then maybe you can use some of the profits to make more mutually-profitable bargains! Success! Capitalism! Whoo hoo! My friends had trouble seeing those deals, because, I think, they kept asking themselves which party was the sucker here, and assuming that it might be them.
The current President of the United States also subscribes to the zero-sum, fixed-amount-of-money view of business. This is really strange considering he put his name on a book called The Art of the Deal, but it's clearly true. Trump does not believe in win/win propositions. He sees the world as win/lose. It explains a lot of his business behavior, and a lot of his business setbacks. It explains, most of all, why most large New York banks will no longer lend him money. Donald Trump does not actually think about business like a businessman. He thinks about business like a con man.
His obsession with trade deficits is pure zero-sum. If you think of there being a fixed amount of trade in the world, a fixed amount of value to pass back and forth, then deficits and surpluses are all that matter. More money is going out than is coming in! Disaster! But if you think of trade as a pie that continues to grow, letting America keep taking more slices even if it runs a deficit with this country or that, then trade deficits aren't the whole story. You want there to be more international trade, not less, because you want that pie to keep growing. Trump imagines a pie whose size is fixed by immutable law, which can never get larger (wrong) or smaller (dangerously wrong), and he's fixated on trying to get a bigger slice than the next guy. And the next guy turns out to be Canada.
(Now, free trade has its problems, because it isn't just about both countries doing well. You need to take care of displaced workers inside your own country, and we haven't. But Trump is never going to fix that, because his zero-sum attitude applies to the working class, too. For the poor to do better, Trump assumes, the rich would have to do worse, in exactly the same amount, and he has no interest in that at all.)
So, Trump is going to the G-7 summit with our six most important economic allies (and not just economic allies) enraged with him. This, to a reasonable businessman, would seem bad for business. To Trump, it's good. Because in Trump's zero-sum, you-can-only-win-what-others lose world view, there are no actual allies. How could there be? If everything you gain comes out of their pocket, and everything they gain comes out of your pocket, no one can actually ever be your friend. This is stupid and short-sighted, but well. There we are.
Trump is incapable of understanding that our trade relationship with, say, France, could ever be good for both the US and France. That our trade relationship with France actually has been good for both the US and France, for more than seventy years, does not matter in this calculation. It doesn't matter to Trump that something is obviously true, because he doesn't see how it could be true, so it must not be. Are you trying to play him for a sucker?
Multiply this mistake by six, then by a hundred. Trump misunderstands every single one of our trade alliances. All of them. He sees all of our long, mutually-profitable relationships as just so many people with their hands in our pockets, which is why he hates our allies and lavishes praise on our enemies. We don't have trade deal with our enemies, so they're not taking advantage of us like, say, Canada. Trump is on the road to a pointless destructive trade war because he doesn't actually believe in capitalism. He doesn't believe in economic growth. He thinks all of that is a cover story, a scam. He does not view the world in capitalist terms. He views the world like one of the small-time mill-town bookies of my youth.
Sad to say, my retired bookie friends, much as I loved them, would probably have screwed up the G-7, too. They just could not think big enough. But to give them their due, they would never have lost money running a casino.
cross-posted from, and all comments welcome at, Dagblog
A Warning from 1992 (Michael Wolraich)
4 hours ago