Trump Defies Corporate America

Many Americans hold a cartoonist’s view of the corporate titan.

They see him as a sort of Wild West cowboy… or an Ayn Rand oversoul cursing the heavy hand of government… as a fellow who pounds his drum for laissez faire.

Yet after Trump withdrew from the Paris climate accord and its bible of government regulations, who sobbed loudest?

The corporate titans.

From a New York Times editorial, bearing date of 1 June 2017:

In January, 630 businesses and investors — with names like DuPont, Hewlett-Packard and Pacific Gas and Electric — signed an open letter to then-President-elect Trump and Congress, calling on them to continue supporting low-carbon policies, investment in a low-carbon economy and American participation in the Paris agreement.

In fact, a “nearly united corporate front” took out full-page advertisements in the Times, the New York Post and The Wall Street Journal, all declaring for Paris.

And so the fierce corporate man of myth goes herding into the regulatory pens… willingly and happily.

This because Corporate America has discovered its soul… or at least its conscience.

That’s the impression they’d like to leave, anyway.

Elon Musk, CEO of Tesla, announced his piety by revealing he would no longer counsel Trump:

“Am departing presidential councils. Climate change is real. Leaving Paris is not good for America or the world.”

Alex Gorsky of Johnson & Johnson moans: “We have established science-based goals to decrease our carbon footprint and we remain committed to achieving them.”

Ah, but here, Wal-Mart president and CEO Doug McMillon gives the game away:

“Addressing climate change is a win-win: good for society and good for Wal-Mart.”

Key element: “Good for Wal-Mart.”

One eye fixes on society, that is… the other on the bottom line.

Which eye do you think Mr. McMillon favors… or the other gentlemen?

Cast to one side your opinion of climate change and consider this question:

Why is Corporate America so hot to be regulated?

Real America deserves a square answer.

Regulation saddles business with extra costs and saws into profits, after all.

And a study by National Economic Research Associates suggests that complying with Paris emissions targets could cost 2.7 million jobs by 2025.

Another study says Paris would have slashed U.S. GDP over $2.5 trillion by 2035.

According to our lights, the answer is this:

Corporate America embraced the Paris accord because it would have gained from it.

Regulation annoys the Johnson & Johnsons, Whirlpools and DuPonts.

But it’s an impossible burden for the striving upstart or the fellow on the middle rungs. They can’t afford it. So they can’t compete.

Regulation therefore builds protective moats around corporations. It pulls up the drawbridge on competitors. It repels invaders.

In nuce: corporations consider costly regulation a trade-off well worth the annoyance.

Economists have a term for it: “rent seeking.”

To cement our case, we summon the small businesses of America to the witness stand…

The New York Times:

The move… has opened up a fissure between smaller companies and some of the biggest names in business…

While multinational corporations such as Disney, Goldman Sachs and IBM have opposed the president’s decision to walk away from the international climate agreement, many small companies around the country were cheering him on, embracing the choice as a tough-minded business move that made good on Mr. Trump’s commitment to put America’s commercial interests first.

“This just heightens the divide between big business and small business,” testifies Jeffrey Korzenik, investment strategist for Fifth Third Bank. “They really have different worldviews.”

And so the prosecution rests…

Here at The Daily Reckoning, we have no heat against corporations as such.

And no one has ever accused us of hostility to capitalism… or to the shade of Adam Smith.

But we hold a violent prejudice against swindle… against fraud in all his forms… in brief, against crony capitalism itself.

We say stand business on its own two legs and let it rise or fall on its merit — let the winners take their cut and let the devil take the hindmost.

Or to return to our castle metaphor, drain the moat… pull down the drawbridge… and let society’s true innovators through the gates.

It might not necessarily be the American way… but it’s the honest way…


Brian Maher
Managing Editor, The Daily Reckoning

The Daily Reckoning