MICHAEL LESTER. ‘Draining the swamp’ : the ‘Businessman’ President

Donald J Trump is called the ‘businessman’ President. The ethics and practices of ‘private’ business, and the nature and ‘business models’ of activities undertaken, are arguably, neither consistent with the established accountabilities of ‘corporate governance’ nor with the innovative future of the’ digital economy’.’   

Trump’s business ethics

Trump as ‘business man’ is not your regular, mainstream, American corporate executive. Estimated with personal wealth at just under $4billion, mainly in real estate, ranked at #156 of 400 American billionaires Trump is the first ever billionaire elected to US President. His executive team is also arguably the personally richest Cabinet to take office in Washington, with combined wealth estimated at between $$6billion to $14 billion. As with Trump’s own ‘private’ business wealth it can only be estimated since it is not on the public record.

Trump’s businesses are run as a private undertaking, not as a listed public company. The Trump Organization is ranked #48 among the top private companies in America, having estimated revenues just under $10 billion. By comparison, UPS, the #48 ranked listed public corporation, has revenues just under $60billion. The quantum value, whether relatively small or large, is consequential from the perspective of potential ‘conflicts of interest’ when in public office. Equally contentious but less discussed can be the ‘modus operandi‘ and business accountabilities of those like Trump, who operate their businesses as private companies rather than stock exchange listed corporations.

Trump’s ‘private company’ experience and ethics are even less aligned with decision-making modalities in the ‘public interest’, than his mainstream fellow ‘businessmen’ that lead publicly ‘listed companies’, His personal ‘business model’ appears to involve a more ready recourse to Chapter 11, bankruptcy provisions, likely to leave creditors largely stranded, while protecting his own asset base. The ‘art of the deal’ involves ‘one-on-one’ fixes, often on a personal ‘tit for tat’ basis, the details of which are held closely between the parties. Trump’s early ‘win’ by persuading the air-conditioning manufacturer Carrier to hold back on its planned investment in Mexico is a case in point. This is not so much a matter of ‘character’ as likely ‘behaviour’ and ‘modus operandi’ based on his past private ‘business’ experience, when talking decisions as the President, acting in the ‘public interest’. There lie ‘crony capitalism’ and even ‘corporatism’.

Listed corporations are accountable to their boards and their stockholders under well-established corporate governance laws and regulations, latterly and post the 2008 Great Recession , particularly in the form of the Dodds-Frank reforms of 2010, aimed at the finance sector. Private companies operate largely outside those accountabilities, in particular in regard to the transparency of their finances, profits and remunerations. Their CEOs typically have no shareholders and their appointed senior executives are there at the whim and gift of the owner-cum-CEO. For example, it has been observed that Trump with his primary interests in real estate and development has a business model that relies on easy money from banks, with whom it has been observed that he has a mutual interest in loose credit and loose regulations. Trump declared his goal to ‘reform’ the Dodds-Frank corporate governance regulatory regime and has now signed an Executive Order to that effect, deregulating the finance sector.

Trump and his team are essentially ‘outsiders’ to the mainstream corporate business world with an ethical framework focused on the best ‘deals’ for themselves, with limited public transparency and accountability. This ‘outsider’ status and mentality may indeed be an important source of appeal to Trump voters. But questions are already being asked about how such ‘private business’ behaviour and experience align with ‘the public interest’, for example, the arrangements for quarantining those interests from his duties as a public official, using a ‘blind trust’ in the hands of his family members; his business deals around the world, involving substantial loans from overseas banks and investors; and his defiant refusal to reveal his tax statements

Trump’s business vision

Trump’s fortune and success is built on businesses in specific industry sectors, such as, real estate ownership and development, construction, casinos and gambling, hotels, resorts, golf courses, not to mention beauty shows, pageants and of course, reality television celebrity. These activities are not the key drivers of innovation, economic growth, wealth and high-value jobs in America. Their ‘business models’ rely on easy access to finance, close dealings with governments rather than innovation, and a form of ‘rent seeking’ rather than ‘creative destruction’. This particular experience and ethic might be expected to guide Trump’s vision of the future nature and structure of American enterprise.

In conjuring up his picture of the ‘carnage’ wreaked on American industry in the form of jobs lost, empty factories and falling incomes of working people, Trump never once makes reference to the role of technology, innovation and skills in the American economy. He acknowledges neither the loss of manufacturing jobs to automation nor the jobs created in the digital economy. His business experience and view is essentially backward not forward looking, inward rather than outward looking, protectionist rather than competitive.

Erecting tariff barriers on imported goods and cars will not bring back the old jobs in car making and steel production. Increasingly and irreversibly automated, robotized and digitized, these industries and others, will require only a fraction of the workforce employed in the past, the skills required will be different, while productivity, value-added, and wages will be higher too. Given his business’ background, Trump’s vision is, not surprisingly, of a past ‘industrialised’ economy,not of a future ‘knowledge-based economy’. The way forward lies not in ‘scape-goating’ and protection but in domestic policies for equitable growth.

Manufacturing in America tells the story. It currently contributes a significantly larger proportion of economic production, measured by share of GDP (36%) and in absolute terms ($6 trillion), than ever in the past. The level of output has doubled in the past three decades and its contribution to ‘value added’ is greater than $2 trillion a year. The ‘problem’ is that as a result of restructuring and automation it now employs one third fewer people than it did, losing 5 million jobs since 2000 to the current level of just over 17 million. This history of job loss, technological change, productivity improvement and structural adjustment happened a hundred years ago in the agriculture sector as part of the growth and development of the American economy and higher standards of living for all.

Trump’s lack of business understanding and experience in the new-economy colours his relations with business leaders at the cutting-edge of America’s future in high-tech, high-skill, high valued-added, innovative and high-wage industries; they are fractious and problematic going forward. Even his early interactions with more traditional manufacturers, such as carmakers in Mexico, in the wake of his threat to impose import tariffs on goods from Mexico, reveal little understanding of the complex, global supply chain operations involved in their business models.

An ecologically sustainable ‘swamp’?

To ‘Make America Great Again’ President Trump proposes to ‘Drain the Swamp’. Based on his experience as a private ‘businessman’ his ‘business’ ethics and vision will likely determine how he does that and the end result.

‘Swamps’ are vital, dynamic and complex ecosystems. They can and do become polluted and degraded; the waters can become murky and tainted, the plant and animal life can be disrupted, some species made extinct, by the introduction of feral species, and their delicate and sustainable ecology can be finally killed by poisons, toxins and lack of life-giving oxygen and stagnation.

Restoring the vitality, dynamism and sustainability of a disrupted ’swamp’ ecosystem requires knowledge and sensitivity to complexity. Blithely, draining the swamp of its life, leaving a muddy, bottom-dwelling habitat, begs the question: what will take its place? Who knows, perhaps a real estate developer might even have a vision to earth-fill the drained swamp and build in its place …a resort, a golf course, or even a casino……cui bono (for whose benefit?)?

Michael Lester (Long View Partners) is a retired public policy economist having worked with governments and international organizations. His particular interests are in: trade, investment and development; science, technology and innovation; environment, water and climate change.  

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