Trump's 'Interventionist Approach' To Economic Policy Presents Consequences

In light of Trump's deal with Carrier to keep jobs in the U.S., NPR's Ari Shapiro talks to Edward Alden, senior fellow with the Council on Foreign Relations and author of Failure to Adjust: How Americans Got Left Behind in the Global Economy, about the consequences of federal government intervention in the private sector.

ARI SHAPIRO, HOST:

To look at what the Carrier deal means for U.S. manufacturing in general, we turn now to Edward Alden. He's a senior fellow with the Council on Foreign Relations and author of the book "Failure To Adjust: How Americans Got Left Behind In The Global Economy." Welcome.

EDWARD ALDEN: Good to be here, Ari.

SHAPIRO: Does this deal with Carrier to keep jobs in the U.S. look to you like a one-off just so that Donald Trump can say he kept a campaign promise, or do you think there will be many more deals like this to come?

ALDEN: I think it's most likely a one-off, but it's definitely a different approach than we've seen in the past. We've never had a president-elect or a sitting president get engaged at this sort of level on the location decisions of a specific company. So this could well set a precedent. You could find other companies coming to Washington looking for help.

SHAPIRO: Yeah, if one company has gotten a deal from Washington, what's to stop every other manufacturer in the United States from knocking on the door of the federal government and saying, my turn - I want a deal, otherwise I'm going to send my jobs to Mexico?

ALDEN: Well, there's nothing that stops them. But the fact is, a lot of this happens already. You know, the states already engage in these very heated competitions for investment. Companies play off one state against another. I mean look at the competition over Tesla's new battery factory that was finally won by Nevada. States were showering benefits on the company.

So this is something that already exists. What's new here is having Washington involved, and we'll have to see what that adds to the mix.

SHAPIRO: Should people worry that at some point the race to offer more and better incentives to keep jobs in the U.S. will result in companies that are profitable but governments that are just no longer getting the tax revenues that they need to by having companies in their states?

ALDEN: Yes, I absolutely worry about that. You look at a state like Texas, which is very big into the incentives game. And it's a low tax environment. They don't have enough money for their public schools and for investments in infrastructure. So this can become a race to the bottom.

I have long advocated - and I accept that it's difficult to negotiate - but some kind of agreements that were, you know, within the United States and also internationally to try to put some curbs on incentives to keep the competition within some kind of reasonable bounds so companies just can't play off one state or country against another.

But I don't inherently see a problem with Washington being involved. I think, you know, what we've had for many years is a federal government that's not particularly concerned with the structure of the economy at all, just looking at the basic rules. I think we're going to see a different approach under Donald Trump with more kind of specific concern for the health of the manufacturing sector. I'm not necessarily sure that's a bad thing.

SHAPIRO: If this is actually a viable, successful way of keeping jobs in the United States, why wasn't it tried years ago?

ALDEN: Well, I think a lot of people are troubled by it as an approach, and I think for good reasons. There is a concern - and the irony here is this concern has historically come from the Republican Party - about the government picking winners and losers, interfering in the free market.

The idea has been that government should just set general rules and let market forces determine. This is a far more interventionist approach than we have seen in the past, and as I say, it's ironic to see it coming from a Republican president since it's Republicans that have been most resistant to this sort of approach.

SHAPIRO: There are such big global forces at work here. Can case-by-case negotiations like this really counter those forces?

ALDEN: No, I think this is, you know - this is a drop in the bucket in terms of the big trends in technology and trade. But that said, a lot of countries do fight to maintain or expand their share of global investment in manufacturing.

Look at Germany where 20 percent of the labor force is in manufacturing compared to about 8 percent in the United States. Germany pays a lot more conscious attention at the level of the federal government to attracting and keeping manufacturers in Germany. So this is something that other countries do that the United States has not historically done. I think it looks like the new administration is going to try to do more of this.

SHAPIRO: Edward Alden is a senior fellow with the Council on Foreign Relations. Thanks for joining us.

ALDEN: Good to be with you, Ari.

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