President Trump more than any President in decades has embraced industrial policy. He not only wants government to favor manufacturing, but vows to use the tax law to prevent manufacturers who are here from shifting factories overseas. And auto manufacturing seems to be his particular focus. To be sure, in this respect his policy has some continuity with the Obama administration, which intervened in extraordinary ways—including bending the bankruptcy laws—to bail out U.S. auto companies.
Industrial policy fails to reckon with the ignorance of government. Central decisionmakers lack the information to choose the best services and products in which Americans should specialize. The past shows that what is best produced here tomorrow will not be what is best produced here today: many of our most productive lines of work did not even exist 20 years ago, let alone 50 years ago. An industrial policy that puts up barriers to companies from moving factories abroad creates a more static economy here at home, one less responsive to the seizing of future opportunities in an era of technological acceleration.
That policy clearly makes American consumers and American shareholders in American companies worse off, because companies will fail to locate where they would be most profitable and to deliver products to consumers at the lowest possible cost. But a government-directed industrial policy is also not good in the long run for the American worker, because the industries that can provide good jobs for the long run change over time, and change faster as technology speeds up.
If judicial nominations are the best reasons to support Donald Trump, one of the best reasons to oppose him is his trade policy. In a speech this week he made clear that he will block the Transpacific Partnership, unravel NAFTA, and try to raise tariffs generally, which he implied were a good substitute for other kinds of taxes. He would be the President most opposed to foreign trade at least since President Hoover signed the disastrous Smoot-Hawley Tariff Act.
There is a reason that freer trade has always been at the heart of the classical liberal vision—from the Manchester School in the nineteenth century to Reagan’s America. It is not only that trade creates wealth through exchange. It is that trade is part of the engine that sustains civilization through human cooperation when we get rid of mind forged manacles, like mercantilism and distaste for foreigners. It is the enlargement of the sphere of cooperation domestically and globally that offers a long-run boost to security as well as prosperity.
Beyond the details of his policies, Trump’s position on trade shows him the opposite of a classical liberal—someone who thinks that political and economic life is zero-sum where the point of a nation is win over other nations and the point of an individual is to win over others. That is the recipe for endless political conflict and division—a medieval Game of Thrones played out in the twenty-first century.