This week, my Post colleague Catherine Rampell penned a blistering indictment of everything the Republican Party has sacrificed to enable the Trump administration. The GOP has gained a tax cut and Supreme Court justices, but the ideological and ethical price was high. As Rampell notes, “the lure of packing the bench with conservative justices is presumably why Republican officials abandoned their putative commitments to limited government and free markets.”
That item is a small point on Rampell’s long list, but it merits further elaboration. Ideologically, the Republican Party was the traditional haven of free market advocates for decades. Sure, there were hypocrisies galore beneath that ideology, but the idea that markets should be given due deference to innovate and adapt was a pretty powerful one.
To use the language of economist William Baumol, writing the rules of the economic game in a way that rewards innovation enables “productive entrepreneurship.” On the other hand, a system that empowers those businesses with strong political contacts rewards corruption. Some economists would label this as “rent-seeking.” Baumol called it “unproductive entrepreneurship.” Ideologues like Ayn Rand used more colorful language, labeling businesses who sought the succor of the state as “looters” and “moochers.”
Over the past week, in the machinations over TikTok, the Trump administration has made its preference for unproductive entrepreneurship as transparent as possible.
To recap: President Trump used the International Emergency Economic Powers Act to force TikTok, a Chinese app popular with the young people, into a sale to a U.S. multinational. The Trump administration had articulated not entirely unreasonable concerns about whether the Chinese company would harvest U.S. consumer data for more nefarious purposes.
Microsoft had expressed some interest in buying the company, but late last week, Trump announced a deal between TikTok’s parent company — ByteDance — Oracle, and Walmart. Sounds great, right? Except that anyone who has looked at the deal recognizes that there is no there there. This is literally the headline of Erin Griffith and David McCabe’s analysis in the New York Times:
The agreement does not deliver on Mr. Trump’s original demand of a full sale of TikTok and it does not eliminate China from the mix. Under the initial terms, ByteDance still controls 80 percent of TikTok Global, two people with knowledge of the situation have said, though details may change. ByteDance’s chief executive, Zhang Yiming, will also be on the company’s board of directors, said a third person. And the government did not provide specifics about how the deal would answer its security concerns about TikTok....Lawmakers, policy specialists and others said the way that TikTok’s deal got done also deserved more scrutiny. That’s because Mr. Trump first forced TikTok into a corner with an executive order on Aug. 6, in which he threatened to block the app in the United States if it did not satisfy national security concerns. He then approved the deal only after Oracle — which has a cozy relationship with the White House — got involved. At different points, Mr. Trump also said the government deserved a cut of any deal.“There’s no there there,” said Carl Tobias, a law professor at the University of Richmond who focuses on federal courts and the constitution. “Is this really about trade, or about the political benefit of trying to bash China and show how tough the administration can be?”
Oracle’s involvement amounts to little more than political patronage. According to the Wall Street Journal’s reporting, Oracle was not a natural home for TikTok. The politics, however, were more hospitable: “Oracle was originally brought into the negotiations to provide an alternative to Microsoft Corp., a rival bidder with Walmart as a partner, said one person familiar with the talks. The U.S. investment firms Sequoia Capital and General Atlantic, which are existing investors in ByteDance, went in search of a tech company with close ties to the administration and settled on Oracle, the person said.”
Tech sites are utterly disgusted by how this played out. It has even repulsed the normally Trump-friendly Wall Street Journal’s editorial board: “Economic statists may cheer all this, but it sure looks to all the world like U.S. government meddling that rewarded political allies.”
The implications of the TikTok deal go far beyond this one deal. There will be similar cases in the future (see: vaccine, coronavirus). Furthermore, as the Times reporters note, the injection of political uncertainty is not good for the free market:
One result of the soap opera: Tech companies and investors said they were increasingly wary of doing business with any company that could attract the scrutiny of the Trump administration. The outcome is too illogical and unpredictable, said David Pakman, a partner at Venrock, a venture capital firm with offices in Silicon Valley and New York.“When there are frameworks applied consistently, one can understand the rules of the game and you maneuver within those rules,” he said. “But there is no consistency here.”
Writing in the Financial Times, Frank Long argues that these steps toward closure are counterproductive:
The idea that anything benefiting China’s tech industry runs counter to US interests is a dangerous and false dichotomy. The US derives considerable geopolitical power from being the largest consumer market in the world. In fact, the sheer size of its gaming market gives the US government leverage over this leading Chinese tech company. It will also force greater investment in bilateralism by China’s tech elite.It is tempting in the current political climate for US regulators to seek out bans that kneecap Chinese tech champions. But that is a short-sighted pursuit of US interests. Natural “reciprocal zones” exist in tech ecosystems, where it is impossible for one party to harm another without incurring harm too.
Some observers note that the Democrats want to expand the size of the state, as well. That also invites opportunities for abuse.
Still, at this point, there is no contest between the two parties. The Trump administration is not even trying to hide its caprice. In just four years under Trump, the GOP has become the safe haven for waste, fraud and abuse. It is now the party of looters and moochers.
But, hey, now Republicans control the Supreme Court. I am sure it was all worth it.
