By Paddy Quick
Donald Trump’s claim to be able to address the economic concerns of the people of the US rests on his supposed achievements as a businessman. While these achievements are disputed, the more serious problems with this claim lie in the assumption that the
skills that go into the achievement of monetary success by an individual will also be appropriate for the decision-making that is necessary for the economy as a whole. Ability on a micro-economic level is thus generally mistakenly seen as evidence for an ability to achieve macro-economic goals.
This is, at root, nothing other than belief that the individual pursuit of profit will, through the operation of the “invisible hand” (a la Adam Smith) result in the “wealth of nations.” By extension, it implies that those individuals who are most successful, as measured by their profits, have thereby contributed the most to the nation as a whole. This is somewhat of a slander on Adam Smith, who did recognize the need for several categories of government intervention in the “free market”, but it does conform with the general belief that the unrestrained pursuit of profit is beneficial to all. Trump’s claim to a wealth of billions is thus presented as evidence of his ability to be President of the United States.
Most mainstream economics, as taught in our high schools and colleges, contributes to this belief, in particular by introducing the discipline of economics with a presentation of micro-economic theory. Students are taught in this about the determinants of the prices of individual products, and, in marginal productivity theory, about the level of employment of labor by individual businesses. (Mainstream theories such as these do, of course, need to be challenged, but I set that aside for now.) It is only later, in the presentation of macro-economic theory, that students are introduced to such concepts as inflation and unemployment. The former, inflation, cannot be understood as the sum of the decision-makers of individual businesses as to the profit-maximizing level at which to set the prices of their products. The latter, the level of unemployment on the macro-level, cannot be understood as the result of changes in the ability of the owners of individual businesses to meet the preferences of consumers. Similarly an individual’s ability to make financial and trade “deals” provides no insight into ßdeterminants of interest or exchange rates.
Drawing a distinction between micro- and macro-economics is thus one way (among several) for radical political economists to address Trump’s undoubted appeal to many people within the working class.
By Paddy Quick