Dr. David Cowan
Donald Trump has exceeded expectations because the expectations were so low in the first place. The problem with much of the analysis of Donald Trump the candidate is that it either tries to look at policy content or to set him up as a buffoon. What we really ought to look at is the manner of his communication and realize that Mr. Trump knows his audience, and he understands the means of modern communication very well. This means he can be flexible over content, and whatever else he may be he is not a buffoon.
There are three elements to his communication campaign: the good, the bad and the ugly.
The good – First, he is not an insider as I discussed yesterday. He is not part of DC nor is he a “professional” politician. Opponents mentioned, and still do, President Obama’s political career amounting to being little more than a community organizer before he was a candidate. Mr. Trump, however, comes with considerable experience of running a large business. Will he become a breath of fresh air? He’ll certainly be a different politician, and he already is, because his campaign is not the conventional political campaign, it is a modern communications campaign.
Traditional campaigns try to control the language and the response. They try to match idea A to response A, idea B to response B, and so on. Mr. Trump lets things get out of control and uses incendiary language, so that idea A gets responses A through Z. He wants to create a “communication noise,” and in that noise he can target specific groups. As his candidature evolves, so does his approach. He has his base, and now he’s got everyone’s attention. This was not going to happen without making a noise, and getting everybody talking and tweeting.
The next step he needs is to narrow the responses, and start to address those who might now listen to him, if he can say the right thing. However, he needs to do this deftly, as he has to confront the bad and the ugly that has gotten him to this stage.
The bad – Even his supporters will admit he has divided many people, but rather than distressed about it they’re happy, because for them this is Mr. Trump making a stand. Yet, if he is to win then he has to get some of the people still opposing him on his side, and of course this includes finalizing the GOP nomination. In his communications strategy, he has allowed for this, because from the outset he would have known that the GOP would never embrace him with open arms. So, you don’t communicate as if they are, not in expectation, nor in hope.
Mr. Trump knew from the start he was in for a rough ride, so what to do? Make the ride rougher. This not only gets attention, it also shakes complacency in your opponent. Keep rattling them, keep them running in different directions, while you ruthlessly pursue your own agenda. This is high stakes, but if Mr. Trump pulls it off, then what a coup. He can show how he turned his opponents around, and his endorsement makes him someone who can bring this all together. This, I suggest, for an outsider was the only realistic strategy for achieving success.
At the moment all the talk is inward looking, it’s about the GOP. Once nominated it will all be about the Democrats and shaking the complacency that will have gotten Mrs. Clinton nominated. If her complacency, or that of her campaign managers, leads to portraying Mr. Trump as a buffoon and asking America to elect the sensible candidate, she will most likely lose. She’ll need to be cleverer than this.
The ugly – Which brings us to the ugly. To date there is much that has been ugly about the GOP campaign. The style of Mr. Trump’s attacks and the disgraceful behavior and online intolerance of a significant portion of his followers has made this a very ugly campaign. On one level, the sooner he distances himself from such behavior the better and he will be able to concentrate his attempts on appealing to a broader voter base. Many of the people who condemned him in the past will at some point change their tune, commentators always do, because they want to be seen to be backing the clever money. On another level, he will need to launch an assault on his opponent. All the things that happened during the GOP nomination are largely neutralized by the fact it was the GOP nomination process, just as much of what Mr. Obama said about Mrs. Clinton was neutralized when he was nominated. It doesn’t go away of course, and Mr. Trump’s opponent will drag up the past, but the past is rarely effective in these campaigns, unless it is the far distant past, and Mrs. Clinton has her own fair share of that.
Mr. Trump’s Communication Coup
Mr. Trump, with this strategy, will get the nomination and you should not underestimate him for getting the presidency, and if he wins it will be a modern communications coup. This is not my hope, nor is it an endorsement; it’s just a reading of his communications strategy and our media age. This is how a communicator wheels and deals, and yet again Mr. Trump is showing us the art of the deal, the communication way.
Dr. David Cowan
Is Trump the candidate changing the nature of American politics? If elected, will Trump the President change the way the business of politics is done? Is he an outsider or part of the usual crowd of American high society? Your answer largely depends on what is your economic worldview.
There are many views of what Trump represents, and many of these are examples of wishful thinking. Conservative opponents wish there was a way to get a different candidate, while liberal opponents etch out story lines in an attempt to stoke the backlash in the hope he doesn’t get the top job. Most views are, in other words partisan, and Mr. Trump is seen a hugely divisive figure. I want to move out of the partisan zone and single out three views of his significance, and discuss how they relate to your economic view of the world.
Celebrity: It could be argued that Mr. Trump’s position is the natural outcome of the dumbing down of discourse in the public square, and highlights the extent to which America has a voting constituency addicted to reality TV and personality politics. His significance in this view is that he represents a change from serious politics to the rowdy and uncouth level of reality television. In this view he is a joke and a fool, and this is pretty much the view of many people and the media outside of America looking on. However, the same constituency misread Obama and greeted him as a savior.
This view is held by people globally who see America as crass capitalism, a casino mentality and a superficial celebrity-driven culture. Sorry to be so brutal, but there you have it, this is what some people think. Their economic worldview is that America uses capitalism to throw its weight around, and Trump represents the worse aspects of American capitalism – Hell, he is Mr. American Capitalism!
Dealer: On the other hand, one could see him as representative of the backlash against the DC way of doing things. His supporters believe he has the business and real life experience to bring a new way of doing things. He will bring a business discipline to the position. He is a unique outsider who has not come through the usual route to gain the candidacy, and will be a new kind of businessman-president who understands the needs of working America. For the outsider or neutral, this at least has the appeal of an interesting possibility, and it will be a question of seeing what the first 100 days looks like to see if proof starts to emerge, or if there is a collapse into celebrity.
This view is held by many people in America, not necessarily GOP supporters, who believe Washington DC is corrupt – the best Congress money can buy argument. They believe too much power resides in DC, way from the State level and favors big business over the entrepreneurial drive that made America great. They see Mr. Trump as one of them, someone who is big enough and successful enough to change the mentality and bring back the dream.
Pragmatist: The third view is a variation on the second, which is that Mr. Trump is not a real conservative, more of an opportunist. This is the most intriguing of the lot. This will mean that a President Trump will be a pragmatist, and will do deals with all interested parties to meet the objective. This is the norm in business, where negotiators have to deal with many interests and put any ideological views to one side. Trump is not an ideological conservative, he has been used to wining and dining with the great and the good whatever their political views. This should make him good at the deal, but it will also lead to many of his supporters ending up disappointed in the same way President Obama has disappointed many of his most expectant and arduous supporters.
This view is one held by people who are suspicious of power, whether it is government or business, and that it is power that is at the base of our economy. This view understands power is usually adrift from the ideology or arguments that get people elected, and becomes an end in itself. This is a view that politicians will do whatever it takes to survive. It differs from the second view specifically in that it discards any notion that politicians get themselves elected to make change. In this view, there is little difference between Mr. Trump and Mrs. Clinton, they are both sides of the same power coinage.
As I said at the outset, there are many views, but these I think are the more interesting ones to explore the various constituencies in the mix and provide for interesting discussion about Mr. Trump the candidate. Which of these views is closest to your own?
One thing is for certain, not many people are available for the position of being an “outsider” of any sort, either because they don’t want to be or do not have the support. This makes Mr. Trump the only option to test the notion of whether an outsider, especially one from the world of business, can succeed.
In Part 2 tomorrow, I will look at how Mr. Trump can communicate to succeed.
5/20/2016 0 Comments
Dr. David Cowan
Commonly the GOP is portrayed as the party of greed and big business, while the Democrats are portrayed as the party of waste and big government. Yet, as Arthur C. Brooks discovered in researching the topic, households headed by a conservative are proportionately more generous than those headed by a liberal, despite the latter having higher incomes. Mr. Brooks argues in this important book that for too long conservatism has been a movement of the head and not the heart. Meanwhile progressives have been able to parlay themselves as champions of the poor and dispossessed, the marginalized to use their parlance.
The purpose of the book is to set out a conservative social justice agenda, which progressives and those on the left will jibe is an oxymoron. However, Mr. Brooks is absolutely right, whether or not you agree with his conclusions. Conservatives in America, and other nations, have tended to push the cause of good economic management and business to the detriment of offering welfare solutions to the many social problems that exist in the nation and around the world. This has left the progressives to capture this territory, control the language around it and come off as holding the moral high ground of being the people who care, as opposed to “heartless conservatives.”
The lessons Mr. Brooks has learned which inform his understanding of the problem are fourfold: people are assets and not liabilities, work is a blessing and not a punishment, values matter most in lifting people up, and, help is important but hope is essential. To get these elements of what he frames as the “conservative heart,” conservatives need to get into the game. Conservatives, as Mr. Brooks points out, have provided often devastating critiques of leftist and progressive programs and solutions, but have failed to provide any real alternative, which presupposes there is a conservative alternative to be offered.
There is, Mr. Brooks clearly believes, a conservative alternative. Evidence of this he cites is the existence of a real social safety net, which he argues is one of the great achievements of our free market system and was recognized as such by both Hayek and Reagan. While I can hear an outcry from the left on this statement, I can also hear many fiscal conservatives say there is a difference between having a safety net to catch you and having a trampoline where recipients get to play around, and the welfare system is very much the latter whereby too many people are using and manipulating the safety system to avoid achieving the very things Mr. Brooks sets out in this book.
We hear a lot about how capitalism has successively lifted generations out of poverty, which I discussed in yesterday’s blog, demonstrating the great advantage of the market organization. However, we also hear about the great inequalities, as I also wrote about yesterday. The progressives and left base their policy options on government intervention to resolve this problem. As a way forward, Mr. Brooks has in his mind “four institutions of meaning,” which are family, faith, community and meaningful work, alongside the government safety net.
To make change happen, the conservative movement has to get some skin in the game, and not become like the Tea Party movement simply a remnant, and he offers a strategy of four steps to transform a minority view into a successful social movement:
Mr. Brooks also offers a program that he sees as a solid conservative agenda, or what he frames as seven habits for conservatives to get the attention of Americans and enable social justice. He argues conservatives have the right stuff to help the poor but don’t win the hearts of the people. His seven habits are:
This strategy and program is largely an effective approach to communication, and could be applied to various areas, not just politics and the problems of poverty. The most important points of the seven are points 5 and 6, the former is important while the latter is a sad fact. It is important that people on both sides of the aisle engage with each other and various groups, since encountering that which we dislike or disagree with makes us more informed and usually more tolerant. It is easier to stick your heels in against a person or an idea you objectivize. Sadly, we live in a communications age where people have tine issues and are overloaded by information and ideas, and so having an essential platform for oneself makes it easier to edit our responses.
I created a tool called The Dialogue Box (you can read about it here) that addresses this communications problem, allowing people to understand other points of view and emotions in order to find a way to having more neutral dialogue. This is essential if we are to move solutions forward in a cooperative way. However, more sadly, the current presidential election cycle is making this task even more problematic and the communications strategies both Mr. Brooks and I propose even harder to achieve on any subject!
America’s dependency on complex tax codes, ever-increasing and contradictory regulations, and over-dependency on the legal profession are at the heart of the problem. I agree that the moral habits Mr. Brooks sets out and the communications strategy he proposes are also part of solving the problem, but if all this does is get channeled into government programs and Washington DC pork then there will be no solution. Additionally, I suggest people both conservative and progressive will read this and suggest it is short on real policy substance, they will want to know what policy solutions are being put on the table. However, Mr. Brooks was not trying to tackle the problem on this level; he was looking at the underlying problem and the philosophical approach needed to achieve change.
Which brings me to a disappointing conclusion that there is a danger that Mr. Brooks has essentially put a conservative spin on the notion that ultimately state actions solve these problems. He offers case studies in how bottom-up actions, with government as enablers, can create change. However, if we need government too much as enabler then have we a) really achieved the mindset change Mr. Brooks calls for, and b) will it reduce government or just lead to a different kind of agency role? Only if government growth is truly curtailed will there be any remote chance of success, but this will only be done by forming the moral habits Mr. Brooks defines in his book. This could be a chicken and egg problem, since Mr. Brooks’ argument relies on the need to change habits to change government, but if there is dependency on government then how can we change the minds? Mr. Brooks offers a strategy to do this, but then I suspect we still end up with the question of substance.
The problem of poverty is an outcome of the economic problem of scarcity, and it is solved by a dynamic economy. The helter-skelter growth of government and complex regulation is a friction on growth and diminishes entrepreneurial dynamics, hence economic stultification. The problem is which government or president is really going to do this? Government is about power, which means growing government in rich countries and corrupt government in poor countries. Advocating smaller government for political professionals and bureaucrats is a little like the proverbial turkeys voting for Christmas.
As Frank Knight argued, as discussed in my blogs this week, there is a need for cooperation based on dialogue, and it is important that people in different camps engage in dialogue to address the problems of poverty. Change will come about through such dialogue, but it will not be dramatic. The solutions to poverty are many and complex, but at the root are the problems of scarcity and the open-endedness of economic progress. Can hearts and minds be won on the basis of facing such brutal economic realities in the emotional environment in which we live? I sadly doubt it, and hence the poor will always be with us.
The Conservative Heart: How to Build a Fairer, Happier, and More Prosperous America
Arthur C. Brooks
Dr. David Cowan
You have probably noticed there is increasing talk about economic inequality. There was some debate before the 2008 recession, but it has now become increasingly heightened and shrill since. The underlying thinking of much of what we read on economic inequality is best described as the Pie School of economics.
The first doctrine of the Pie School is that there is a very large pie. The second doctrine is that everyone should get fair shares in this pie. The third doctrine is that the fair share of the pie should be handed to some people on a plate. The fourth doctrine is that the problem we have today is that 1 percent of the population is getting more than its fair share of the pie, which in America represents 20 per cent of the pie going to 1 per cent of the people. Lastly, though not exhaustively, a whole host of inequalities need to be added to the economic question to ensure that the pie is baked the way certain people argue it should be baked.
Of course, the notion that you could go out and bake another pie and set up shop doesn’t seem to enter into the discussion.
The new Pie School narrative post-2008 recession is well outlined by Joseph Stiglitz, who argues that in the US in 2010 the top 1 per cent accounted for 93 per cent of the growth in incomes. This means the middle class is too weak to support the consumer spending, and it is this that has historically driven our economic growth.
As a result, millions of people end up borrowing beyond their means, which makes the economy more volatile and vulnerable to shocks. He wrote, after the fact, that “the fact is the economy in the years before the current crisis was fundamentally weak, with the bubble, and the unsustainable consumption to which it gave rise, acting as life support.” Stiglitz also rejects the idea that greater trade flows will always increase general welfare, suggesting the removal of trade barriers is a euphemism for getting rid of good regulation.
A lot of the Pie School argument for equality is based on creating some kind of world where we create a “reset” in which those who have been born into a poorer station in life will find themselves in a good place. For some this opportunity may well solve their problems, but, and I hate to sound a cynical note, others will simply end up digging themselves into a new hole. The reason? You may succeed in changing the rules, but you haven’t changed the fundamental dynamics of the economy. Nor have you altered human personality.
However, the new Pie School argues something the old Pie School did not argue, which is that inequality is not just about the principle of equality in society. Inequality in fact impedes economic growth. Having lost the battle of principles in the past, the reinvention today takes the tactical approach. Yet if we look at economic history, from the industrial revolution onwards, rooted as the times were in huge inequalities that dwarf ours today, the economy grew and lifted generations out of poverty.
The next convoluted turn in the road of the popular Pie School is the cause of redistribution, which is now focused on ‘predistribution,’ which means dealing with the origins of distribution of incomes and creating a ‘living wage’ for all.
Former leader of the Labour Party of Britain, Ed Miliband, recently wrote an excellent defense of the Pie School doctrine for Prospect magazine. He wrote, rather generously one is to suppose, that “We need, too, a much more open discussion about the top 1 per cent. We should acknowledge the contribution they make as well as the burden they place on everyone else... The entrepreneurs, inventors and software designers who reap big rewards often make a big contribution to the creation and sustaining of jobs, but what balance should be struck between how much they are rewarded – and how much more than others in their companies – and how much they are taxed?”
Pie thinking also had a boost thanks largely to an economics book that has become something of a cause célèbre in the media. Written by a French economist Thomas Piketty, Capital in the Twenty-First Century has become a sell-out book. It is a study of equality and inequality in Europe and the US since the 18th century. It was originally spectacularly ignored in France, but its translation in America created great excitement.
Piketty argues the conclusion that wealth will accumulate if the rate of return on capital is greater than the rate of economic growth, which in the long term leads to the concentration of wealth and economic instability. It comes as no surprise that Piketty proposes a solution: a global system of progressive tax and transfer to help create greater equality and avoid concentration of wealth in the hands of a few. By all accounts the book is well-researched in terms of the data, but like Karl Marx himself, having understood the problem he is fantastically wrong about the solution.
Chicago economist Frank H. Knight noted in the 1920s that inequality is indeed a concern in capitalism. It is, as Piketty’s research suggests, an inherent outcome. But what Knight saw as the outcome of the problem is that large-scale inequality will lead to “reformers” like Piketty, people who will say more government and more taxation are the answers to the problem. If you read Miliband, Stiglitz and Piketty, they all conclude with the same result that what is needed is more government and more taxation. However, as Margaret Thatcher famously said, the problem with socialism is that you eventually run out of other people’s money.
The problem such knee-jerk reactions create is the path that is well-trod with good intentions. It, in fact, leads to a depression of the dynamics that create markets and growth. Some inequality is a necessary outcome of markets, and attempts, however well-intentioned, to erase it are a fool’s errand. Concentration of power, hand in hand with government, will oppress entrepreneurial power that is in fact the driver of the economy. We need policies that will promote entrepreneurship, and bring confidence back into the economy, which in turn will reduce inequalities. This is the rising tide raises all boats argument highlighted by Jack Kemp back in the Ronald Reagan days.
Since the beginnings of capitalism, inequality has spurred many people into action, and to become entrepreneurial, and this is what creates wealth and jobs. If we look at companies old and new in our economy, they have been created by individuals and families at some point and succeed through creativity, reinvention and effort. In other words, they have created new pies. Economic policy should be geared towards this fundamental dynamic, not finding ways to punish and limit the individual outcomes of those who are successful in creating the wealth.
Much of the Pie School thinking and rhetoric is based on breeding resentment in the economy. The reason Pie School thinking and protests have emerged since the recession of 2008 is because this was the first genuinely middle class recession. It impacted the haves the most, and they needed a scapegoat, and found one in “big business” and bankers. There is much to be found wrong in big businesses and banking apart from greed and “fat cats,” there is also cronyism, government-backing and failed regulation. The repeal of the Glass-Steagall Act, for instance, was one of the root causes of the bubble, so government has to take its fair share of the blame.
However, the middle classes must also accept part of the blame. They helped fuel the bubble by treating their homes as investments, speculating on the value of their properties and flipping homes. Many individuals behaved as if they were professional investors, and this explains in part why many borrowed beyond their means. In addition, their own greed got them into trouble by thinking their homes were worth more all the time, as if there were only one direction. The economy has its own law of gravity, as what goes up must come down at some point; all bubbles burst. How did people prepare for that? Not very well.
Recession can be both market-wide and individual. As I Wrote in 2006, before the recession, in Economic Parables: The Monetary Teaching of Jesus Christ, “the fragility of debt is a big picture and small picture thing. The big picture is that we may be living in an economic bubble, and history teaches us that all economic bubbles burst. If this happens, many of us will be in deep trouble. The small picture is that people also experience their own personal bubble. The bubble bursts when they lose their job, get a divorce, and so on. Meanwhile everyone is carrying on business as usual. Debt, essentially, is a relational issue.”
The last doctrine of the Pie School is to find someone else to blame, so that individual irresponsibility is excused. Besides which, I didn’t hear anyone complaining about how high the price tag was on their home when prices were rising, and I didn’t hear too much about inequality then either. Greed is myopic, and it is human behavior not a system.
The problem is, as Knight argued, economics is a hard task and the economy a hard task-master. Knight was a great prophet of economic realism, something which has been lacking for some while in our troubled economic times. Change is not achieved by hollow idealism, and Knight was always suspicious of do-gooders in the economy. I argue along similar lines, in book Economic Parables, that the economy is a reflection of our human endeavors and puts a number on what we are really like. This applies to inequality, because we do not treat each other equally, and this simply shows up glaringly in the economy, it puts a number on it.
Dr. David Cowan