Feedback loops are very important for survival. But what happens when they’re misleading? Or deliberately misinterpreted?
Suddenly, the gullible emotion of self-preservation becomes downright dangerous to your health.
Quicksand is the best example. It looks like sand, feels like mud, but can drown you like water.
So your first reaction is to step on to it without worrying, because it looks like sand.
You get stuck.
Then you struggle away and try to get out. After all, that’s how you’ve dealt with mud since childhood. It’s a well-established feedback loop that tells you how to react.
But struggling is precisely the wrong thing to do.
Even though your mind and body are telling you you’re dealing with something familiar, with an established appropriate reaction, it’s the wrong thing to do. The feedback loops are lying.
I think we’re at the same place in public policy. On a global level. We’re stuck in quicksand, and we’ve realised it isn’t just sand, but everyone is pretending it’s just mud.
It’s a misdiagnosis that’s leading to the wrong feedback loop. And therefore the wrong reaction.
Tomorrow, we’ll look at how this applies to Brexit and the EU. For today, consider President Donald Trump.
All around the world, journalists, analysts, politicians and economists believe that Trump is anti-trade. This completely mystifies me.
It’s like pointing at quicksand and saying “Look, it’s clearly just sand, we can walk across it no problem.”
Then, as the sand rises to their waist, they declare, “Look, it’s clearly just mud. We can wade out.” They sink deeper.
As the sand rises to their chin, they tell onlookers, “Don’t worry, it feels just like water and I can swim.”
I think we’re about halfway through the process when it comes to understanding Trump.
The question is, are you deluding yourself too?
Misdiagnosing Trump on trade
Now Donald Trump is clearly pro-trade. His entire policy plan is based on the idea that complete free trade would be best.
The US has been pushing for freer trade around the world for quite some time. It leads the way with fairly open markets.
But precisely because the US leads the way, people believe it is being taken advantage of. Other countries are getting away with more trade protection than the US. At least, that’s what American voters believe.
The obvious way to deal with this is to continue pushing for free trade around the world. But this is where Trump diverges from other politicians. Probably because of his experience as a business man.
The way Trump sees it, there’s nothing like giving someone a taste of their own medicine if you want them to stop misbehaving. Especially because they have to take it, or admit their own medicine is poison. There is no self-righteous or respectable way out of the pickle. You either give in, or admit you are a hypocrite.
So Trump threatened the EU with agriculture tariffs, Japan and Canada with car tariffs, and so on.
This puts those countries in an impossible position. They can’t put up trade barriers in reply, or they’d be behaving like Trump. And free trade rhetoric alone isn’t going to be enough any more either, because Trump has called their bluff. If countries want to trade with the US, they’ll have to lower their trade barriers too.
All this is perfectly straightforward to me. But it mystifies others so deeply that, even drowning in the quicksand, they declare it to be perfectly solid.
Let’s look at an example.
Delusion is a great form of defence… for journalists
Bloomberg’s David Fickling is laughing about the fact that Trump’s new trade agreement with Canada and Mexico is actually pro-trade, not anti-trade, as he assumes the president is in favour of (emphasis added):
For the group of people meant to be enemies of President Donald Trump’s trade agenda, the revised North American trade deal reached shortly before the stroke of midnight Sunday looks pretty good.
Despite the new name (the U.S.-Mexico-Canada Agreement, or USMCA) dropping any references to trade, let alone freedom, the tariff rates on imports from Canada and Mexico are still a mass of zeroes. The main new element — the abolition of a variety of milk Canada introduced last year to support its domestic dairy industry — is ultimately an anti-protectionist move.
Yes, Trump is an idiot because, having threatened to hike trade barriers, he’s managed to pull off a trade deal that reduces them! Silly him, he’s ended up agreeing with his critics, haha.
Now Fickling’s position makes no sense. Trump wouldn’t bother with a trade agreement if he wanted to increase trade barriers. He would just implement them. As he has in the past.
But the US trade barriers were implemented for a reason. To give the US something to negotiate with in lowering trade barriers mutually. Hence the logical progression Trump has followed continuously. Implement barriers, negotiate, and then mutually lower both countries’ barriers.
The end result is the one Trump was aiming for. Lower barriers in Mexico and Canada, while the US only bluffed with threats of their own barriers.
The inability of journalists to see this is what’s really fascinating. Despite Trump boasting about his trade agreement, the media still thinks he’s anti-trade. The only way they can reconcile this is to claim Trump is misleading, instead of reaching the obvious conclusion – that he’s in favour of trade and good at negotiating.
The media are drowning in the quicksand of their own delusions. It’s the same over North Korea and Iran. But we’ll leave that for another day.
Trump is not just embarrassing Americans
Americans are finding themselves apologising for Trump when they travel. Which is a good idea, but they’re doing it for the wrong reasons.
Overseas perceptions of Trump suffer from the same delusions as American journalists do.
A few nights ago, a Japanese friend and I went through the typical progression of discussing Trump. The media in Japan paints Trump as anti-trade. I pointed out that, everywhere he hikes trade tensions, they end up falling (except in China, so far). So perhaps he’s not against trade, and not as dumb as he acts.
And then we got to the real matter at hand. Faced with Trump forcing lower trade barriers out of Japan at negotiations in coming weeks, by using his now established method of threaten and then compromise, my Japanese friend said “Yes, but we need to protect Japanese rice farmers.”
And there you have the real nature of the matter. I replied, “You sound like Trump!”
Finally it sunk in for him.
The choice for the Japanese, as it was for the EU, Canada and Mexico, is now between free trade and exposed hypocrisy. They can’t argue Japanese trade protections are good, but American ones are bad, and still have the high moral ground.
Being given a dose of your own medicine suddenly makes you realise how the other side has been feeling.
Delusions even corrupt maths
David Fickling, in his Bloomberg article, also commits a favourite Remainer fallacy.
Speaking about the reduction of trade barriers on milk under Trump’s new trade agreement with Canada and Mexico, he writes: “More to the point, milk products comprise an almost infinitesimal share of the trade relationship between the two countries, accounting for about $364 million, or 0.06 percent, of each-way flows.”
In other words, Trump’s achievement to lower trade barriers on milk is minimal because not much milk is traded.
But why isn’t milk traded? Because of the trade barriers!
This is like the EU saying to the UK, “Most of your trade is with us, so you shouldn’t leave.” But we’re trading with them because we’re stuck with them in the first place!
You can think quicksand looks like sand. You can declare it’s nothing but mud. But that doesn’t change what it is – quicksand.
Until next time,
Nick Hubble
Capital & Conflict
Category: The End of Europe