Yet Again
In economics, the basic tenet from which all theory and policy emanate is that resources, whether physical or intellectual, are scarce. As such, their optimum allocation as factor inputs to the productive process is critically important to a society's overall well-being. Free-market systems allow scarce resources to be allocated via the pricing mechanism. Within the framework of the predictable application of law, the demand for and supply of a particular good or service meet at an equilibrium price satisfactory to all market participants, and hence sufficient to clear the market and lead to further productive activity. The polar opposite to this system is central planning, which replaces individual decision-making with government edict as the means of determining what, where, when and how much is produced.
A clear lesson from the 20th century is that centrally-planned economies are not only unproductive but ultimately unsustainable. Think of the collapse of the USSR, or the stark contrast between West and East Germany prior to their merging, or the surge in the Chinese economy once freer markets were permitted. There is thus cause for real concern with what is emerging from the Trump White House regarding American investment and international trade. Starting before his inauguration and continuing thereafter, President Trump has, for example, forced Carrier, a manufacturer of air-conditioning units in Indiana, to maintain 800 jobs in the state rather than shift them to Mexico; he has openly criticized Apple for not producing more iPhone components in the US; he has lashed out at Boeing, and he has threatened auto companies with punitive border duties on vehicles not made domestically.
While none of these actions approaches anything like central planning, they do smack of yet another version of industrial policy, wherein a government - or, in this case, Mr. Trump himself - uses negotiations, tax laws, tweets, and trade talks to favor some industries and punish others. They look worryingly like the failed "Latin American" model of import-substitution prevalent in the 1960s and 1970s. Already they seem to be forcing companies to make investment decisions based not on an unfettered price signal but, rather, on a tax break or, worse, a threatening tweet from the President. While this may seem like good news for workers who keep or re-gain their jobs, it is not good news for the economy in the long-run. Affected companies will be less competitive internationally, and workers, who are also consumers, will pay higher prices or buy lower-quality goods. More interventionist government policy - and ad hoc, erratic, vindictive pronouncements from the new President - will ultimately have grave economic consequences. Better that Mr. Trump focus solely on his plans for tax and regulatory reform, and infrastructure re-building.