To paraphrase a famous cliché, “As Trump tweets, so goes the stock market.”
Last Thursday, Japanese car maker Toyota’s stock plummeted following a Donald Trump tweet critical of the company’s announcement it was opening a plant in Mexico which would produce Corollas to be sold in the U.S. This was only the latest incidence of various companies’ stocks rising or falling following Trump’s Twitter commentary on their businesses decisions.
While it is tempting to interpret the responsiveness of big business as proof of the success of president-elect’s pro-growth agenda, this new phenomenon also has darker undertones. It demonstrates that modern elected officials wield a new kind of power—one that exists entirely in the abstract space of the digital world and therefore evades any traditional form of checks and balances.
The spontaneity of the market’s reaction to Trump’s tweets provides the best possible example of why dissipating federal power is essential to preserving liberty. It is also a good lesson in the difference between public and private sectors.
Yes, financial markets rise and fall on rumors, a fact of economics which is equally ruinous whether the issue is the boom and bust cycle of bank runs of the 19th century or the bubbles caused by the speculation of today.
However, when banks or businesses misbehave and bring about financial ruin, they must face the anger of the public whose livelihoods they’ve destroyed through their irresponsibility and greed. The same cannot be said of public entities, such as bureaucratic agencies or government offices. No matter the scandal, they endure.
That is why Trump’s ability to influence the stock market is troubling. While a CEO has the same power through his public statements and branding to influence the stock market, he cannot avoid the consequences of his actions forever. The same is not true of the president, for whom the worst that can happen is a failed policy agenda which results in his not winning re-election come 2020.
And while it’s tempting to claim that Trump is simply sticking it to wealthy CEOs whose decision to move their business outside of America impacts local job markets, those same employees are also affected by the resulting decline in business which follows a downgrade of a company’s stock, as are the consumers to whom costs are passed on, as well as stockholders who lose money as a result of political jockeying.
Matters of free-market economics aside, the political connotations are the real issue here. The digital age has brought about a new type of power which government officials can wield. It is an odd mix of hard and soft power. While the results of digital action manifest in the usual ways—through government mandates and legislative acts—the catalyst for these acts is of a much murkier origin. Is Trump to blame for the stock market reaction or are those who interpret his social media posts as actionable policy and react accordingly? Empirically, it is impossible to say.
As bad as this new kind of digital political power is, reigning it in is worse, as it is impossible to curtail digital action without trampling on protected freedoms. This is a case where the solution threatens to do as much damage to civil liberties as the problem.
The charm, if such a word may be used in reference to Trump’s trademark braggadocio, of the president-elect lay in his ability to use popular platforms of social and cultural power to subvert the values which had built them. In doing so, he engaged in a sort of creative destruction of the elites. This is what political analysts interpreted as populist appeal, as by doing so he made people feel that entrenched bureaucrats, representing the roadblock between the will of the people and a policy agenda that matched their needs, was being removed.
However, Trump will soon have political power, and creative destruction does not translate well into a hierarchical system of power which is designed to endure long-term. Removing the iron-triangle—the relationship between lobbyists, federal bureaucrats and Congress—is undeniably a positive step towards the resurgence of individual liberty. But, as Trump’s Twitter tendencies show, the president’s actions carry weight outside of this sphere; they intrude into the private sector as well. And the growth of bureaucracy at the expense of private liberties is exactly what led to the populist groundswell which carried Trump to office. Lest Trump is careful, the unique and untested political power of the digital world threatens to cannibalize that which it has created.
Also published on Medium.