Externalities and the critical difference between a statesman and a businessman

Spanish: Externalidades: la crítica diferencia entre un estadista y un hombre de negocios

In 2012 the Presidency of the United States was disputed between Barack Obama and Mitt Romney.  At that time, in various press media outlets, I emphasized the simple idea that to be a successful businessman is a merit, but it does not make anyone a good governor since a country is not a business. Some two years ago, in our university, we attended a commencement speech delivered by Mitt Romney on success, full of commonplaces and empty ideas, which demonstrated how mediocre and arrogant a successful businessman could be, although not as successful or as mediocre as the present President Donald Trump.

More or less at that time, Noam Chomsky sent me various articles and commentaries on the key reality of externalities. In a few words, externalities are certain effects that do not enter the equation of a good business deal. Two parties can make an excellent deal, but this does not mean that, in the long-term results and in a broader context, it will benefit all or even themselves, as the basis of economic liberalism indicates: pursuing individual interest necessarily leads to the benefit of the rest of society.

For example (I briefly recall two examples from Chomsky): an excellent deal between two businesses can lead to an international or ecological catastrophe. Lower taxes have an immediate effect on business:  individuals can see the impacts on their savings and can undertake negotiations that are very convenient at the beginning. When the governments invest less in infrastructure, those who use the roads end up bringing their cars to a mechanic more frequently. Everyone complains about taxes and all prefer to pay less, but no one complains at what they must pay to repair their cars. Generally, the contrary is true since we are all thankful for a good job done by a mechanic. In other words, the destruction of the environment and the destruction of goods such as cars, glass, roofs, etc. has a positive effect on the economy, but in the long-run it doesn’t generate more wealth nor is it responsible for the reality that surrounds us, such as the environment, social equilibrium, and the economy in the long term. 

  A successful businessman does not worry about the cost of an employee’s previous education nor the future fate of his employees when they lose work. In great measure, this is assumed by the cursed State, not to speak of other aspects, such as the police repression of violence caused by obscene social inequality caused by the success of a few. The State is accused of bleeding the successful businessmen with unjust taxes that prevent the successful from being even more successful.

To put this in some figure: the fact that a soccer player is an excellent penalty kicker does not make him an excellent coach. A businessman is an able chess player when his hand is checkmating the adverse queen (harassing the adversary before closing an excellent move) but this does not make him a great chess player who needs to plan the game from the beginning.

Even more graphic: the nature of the successful businessman is already evident in the first week of the administration of Donald Trump.  His stormy and erratic measures and decrees reveal the hand of a businessman: pressure, intimidation in the short term to cut down a tree without thinking of the forest.  The idea of castigating Mexico with 20 percent customs barriers on their exports to the United States does not consider that all of these exports, according to the rules of the capitalist world that Trump pretends to represent, are not produced by a fantastic and arbitrary element but by the old rules of supply and demand. A collapse of trade relations between the United States and Mexico, two great commercial partners, will bring serious harm to the US economy. Even apart from the geopolitical consequences, such as a Mexico seeking alliances with China, for example.

If we look at every decision taken by President Trump, each based on the same superstition of the way that the world works, as if externalities did not exist, as if everything is reduced to a struggle between powerful businessmen: the approval of the Dakota pipeline without considering the possible ecological impacts, the blocking of refugees from countries that are victims of globalization, as if there were no human rights of children of wars and there were no diplomatic retaliation of possible allies, the beginning of the harassment of Mexico, their third most important economic partner, as if the United States were an island or would respond to the mercantile context of planet Jupiter, and a long etcetera.

The only idea that Trump was able to sell to his voters, to return lost jobs to US industry, pressuring and intimidating US businesses, could be a penalty goal, but in the long run, it involves a number of goals against. Again, according to the logic of capitalism, it is not possible to produce the same cars and the same chairs with workers that in China make a few thousand dollars per year, as with workers that in the US would earn forty or sixty thousand dollars. 

For a number of years, we have been repeating what the cause and consequences are: the solution that businesses require in the face of this imbalance between costs and final prices is even faster automation in the automobile industry, a tendency that goes back decades, but there are other sectors where robots continue to expand.  The accused universities continue to bring more value added at the expense of traditional workplaces, in agriculture, in services and even in transport. Today, in many of the industrial states of the North center of the US (unhoped for Trump voters) the profession of a truck driver is one of the principal ones due to the expansion of the economy. Nevertheless, the reality of cars, buses, and trucks that do not need drivers will increase.

This is an inevitable reality unless we come to a civil or international war and we return to earlier stages of industrial capitalism. 

Obviously, a successful businessman could be a great statesman, as could a trade union leader, a military man or a professor. But none of these will be a good political leader or a good president if he believes that applying his successful union methods, or military or pedagogical methods will be the key to governing a country well. This is nearsightedness and, sooner or later, reality will pass over us when we ignore it because of the force of self-pleasing narrations.

This is much more the case if we are dealing with an ego blinded by his own light.  Then all that we can hope for are crises of all kinds: economic in the best case; social or even war in the worst. 


(Translated for ALAI by Jordan Bishop)

– Jorge Majfud, Uruguayan-US writer and profesor, is autor of Crisis y La reina de América among other books


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