Trump imposed significant tariffs during his first term, and many businesses applied for exemptions. Who got them? A recently published statistical analysis found that companies with Republican ties, as measured by their 2016 campaign contributions, were significantly more likely (and those with Democratic ties less likely) to have their applications approved. But that was only a small-scale rehearsal for what could be coming. …the tariff proposals Trump floated during the campaign were far wider in scope and, in the case of China, far higher than anything we saw the first time around; the potential for political favoritism will be an order of magnitude greater. …tariffs create more potential for cronyism than other taxes…our laws offers so much room for discretionary enforcement. …a system that rewards businesses based on their political connections will surely exert a drag on economic growth. Many attempts to explain Italy’s dismal economic record over the past generation attribute poor performance in part to pervasive cronyism. One recent study found that populist regimes, whether of the left or the right — regimes that are generally crony capitalist as well — tend to suffer a long-run growth penalty of about one percentage point each year.
By the way, I wrote about the study that Krugman references in the final sentence, so I’m glad he gave it more publicity.
And I’m glad he warned about how Trump’s protectionism will facilitate more corruption.
He’s exactly right.
It’s frustrating, though, that he failed to apply this analysis to other recent examples of corruption-enabling intervention, all of which involved the White House having the power to provide favorable treatment to campaign contributors.
So it appears that Paul Krugman is sometimes right (as I noted in 2016 and 2018), but in this case he is right because it fits with his partisan preferences.
