Donald Trump’s original nominees to his economic council included some 15 names of which only two are economists. Commentators were swift to press the point that this group was an all-male affair, and fun was poked at the fact that six of them have the same first name, Steve.
This could have been the birth of “Stevenomics”, a branch of economics where the first name and gender trumps education and experience.
Apparently not insensitive to the rebukes, Trump went on to name nine further advisors, eight of whom are women, and none of whom share the same first name. Let us have a look at who they are.
Some are major donors to Trump’s campaign: Steve Mnuchin, Steve Feinberg, Andy Beal, Tom Barrack, Howard Lorber, Darlene Jordan, Carla Sands, and Diane Hendricks. As many as ten are from the financial sector (David Malpass, Steven Mnuchin, John Paulson, Andy Beal, Stephen M. Calk, Steve Feinberg, Tom Barrack, Anthony Scaramucci, Carla Sands, and Judy Shelton).
Other industries represented are steel (Dan DiMicco), energy (Kathleen Hartnett White), tobacco (Howard M. Lorber), building supply (Diane Hendricks), shipping and packaging (Liz Uihlein, whose husband is also a major donor), and real estate (Steven Roth). Six are from think tanks, public policy and non-profits (Dan Kowalski, Stephen Moore, Darlene Jordan, Betsy Mc Caughey, Brooke Rollins and again Kathleen Hartnett White). One is professor in economics (Peter Navarro).
The original nominees included only two persons with degrees in economics (one Master and one PhD). Thanks to the new arrivals, this has been boosted by at least two more. Most of those initially selected hold MBAs. The legal side has also received a boost through the new additions, of which at least four have law degrees, bringing the total to five.
Those with doctoral degrees are now four, compared to only one in the first round. Three have no college education. Steve Miller and Dan Kowalski, members of Trump’s campaign team, will preside the council. In the past, economic councils have been chaired by great economists such as Arthur Okun, Alan Greenspan, Martin Feldstein, Joseph Stiglitz, Janet Yellen, Ben Bernanke, and Alan Krueger.
While it has been shown in the past that presidents with law degrees outperformed presidents with an economics background in terms of GDP growth during their time in office, it is difficult to fathom this economic council which still includes fewer than 20 percent economists even counting the new arrivals.
To be sure, the IMF is headed by a lawyer, Christine Lagarde, but at least her staff is made up of economists. Who would name a scientific board with only 20 percent scientists? What would one make of a Nobel prize in literature if the committee picking the winner only included 20 percent literary scholars?
While the enlarged team of economic advisors certainly makes the team look stronger, better educated, and more experienced in public policy making, it is still dominated by big business, finance and corporate types, including a fair share of donors to the Trump campaign.
That is significant issue of conflict of interest for which US law makes no provisions. Unlike most federal officials, presidents and vice presidents are not subject to conflict-of-interest prohibitions.
Americans will have to trust Trump or Hillary Clinton both equally to do the right thing since neither would be bound by law to distance themselves from such interests.
Running a company is not the same as running a country. Sadly, the composition of Trump’s team of economic advisors suggests the Republican presidential candidate does not appreciate the difference. Nor does what he said regarding his economic program suggest otherwise.
The team is most likely to seek to maximize corporate profits above all else, and to protect firms, primarily those in the sectors included in the council, from the impact of international competition.
This might be why there are so few economists in the team because economists tend to seek to maximize the welfare of the nation and to eliminate protections and advantages of certain interest groups because such policies create distortions in the economy, prevent an efficient allocation of capital, and hurt consumers.
One has to realize that the US has already made a significant shift in the direction of profit maximization at the expense of consumers.
Gustavo Grullon found in his study that 90 percent of US industries have become more concentrated over the past 20 years. Today, the US has a mere 50 percent of the number of listed firms it had in the 1970s. 2015 was a record year in terms of mergers and acquisitions. Moreover, 70 percent of the top 220 US firms have either Blackrock or Capital Group, or both, as their top two investors.
The high degree of concentration in US industries has helped generate impressive growth in profits, to the great pleasure of the shareholders, but not in the interest of the general public.
High concentration in industries creates monopolistic or oligopolistic behavior which is usually accompanied by less choice for the consumer, lower quality output, and higher prices. We all know this is true. All of us will maximize our efforts when we have something to lose, and do the opposite if our slacking is risk free.
Today, the US needs more competition, not less, in the interest of the country as a whole, but perhaps not of shareholders.
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