To fight Trump’s voodoo economics we must be evangelical about capitalism
If we want to fight Trump’s voodoo economics, we must appeal to the heart too and remind people why capitalism is worth fighting for, writes Eliot Wilson
“Tariff is the most beautiful word in the dictionary,” President Trump has often said. That mixture of the romantic, the mundane and the weird which is so characteristic of his speech has hung over his second administration since its beginning. A protectionist regime of tariffs was inevitable but the details were elusive. Last week the world had to wait no longer.
Trump’s voodoo economics
Trump dubbed last Wednesday “Liberation Day”. He appeared in the White House rose garden with large placards listing “reciprocal tariffs”, like a television game show version of Top Trumps. The headlines: a baseline tariff of 10 per cent on all imports, with some unlucky trading partners receiving further penalties. The UK seems to have escaped all but the universal tithe, but China merits 34 per cent (to add to an existing 20), Taiwan 32 per cent and Japan 24 per cent. The EU has been hit with a 20 per cent rate.
On “Liberation Day”, the president declared that “April 2, 2025, will forever be remembered as the day American industry was reborn”. This is wild hyperbole, based on what any self-respecting Vodouisant would be embarrassed to call voodoo economics. That in itself is instructive, however, reminding us that Trump’s obsession with tariffs is not primarily an economic policy. It is much more of an emotional impulse and an attempt to assert dominance.
For the President, trade is like life: a zero-sum game. There are winners and losers. He cannot understand trade deficits, which he sees as a debt or disadvantage; yet just as the United States imports goods and services, so it imports capital and investment. The “balance of trade” that Adam Smith called an “absurd doctrine” is a chimera.
Driving this is Trump’s eternal victimhood, a suspicion threaded through his character. He believes America has for decades been “ripped off” and taken advantage of by other nations through “unfair” trade relationships.
It is the funhouse mirror in which Trump sees the world, but its distortions have not prevented him from parcelling it up as a pervasive manifesto of grievance and the need for revenge. Ultimately that is what 77m Americans voted for last November.
Capitalism is in need of a rebrand
Those of us who believe in the extraordinary power of free trade to drive global prosperity can shake our heads at the falsehoods and misrepresentations, but we must also learn from Trump’s ability to harness how people feel.
Last week Ogilvy and Mather’s behavioural science magus Rory Sutherland appeared on this paper’s “Boardroom Uncovered” podcast. He noted that in the 1980s, the ideological divide between East and West made people see free-market capitalism as something to fight for, as an emotional cause. Its very victory has undermined that.
“Somehow we ourselves have managed to make free-market capitalism so boring that I’m not sure people really feel the urge to defend it any more… we need a better word for it which recognises… that fundamentally wealth is created, value is created through innovation, marketing, behavioural change.”
The free trade which underpins capitalism needs to appeal to the heart as well as the head. We need to be evangelists: free trade increases choice, lowers consumer prices and costs to business, drives efficiency and competition and maximises resource allocation. It is a universal benefit. We know this and we can see it. In the past 35 years, as protectionism has waned and markets have been liberalised, the number of people in extreme poverty around the world has fallen from 2bn to 700m.
The way that free trade helps drive innovation is genuinely exciting. Deirdre McCloskey argues that we should talk not about capitalism but “innovism”. We are a species of ideas, with an almost infinite capacity to learn and explore, and it is this urge, more than simply the accumulation of capital, which has transformed the world. In The Principles of Political Economy, John Stuart Mill was explicit.
“It is indispensable to be perpetually comparing [our] own notions and customs with the experience and example of persons in different circumstances from ourselves… There is no nation which does not need to borrow from others.”
Tariffs are the smothering, stultifying enemy of free trade. But that free trade is more than an instrument of Carlyle’s “dismal science” of economics. It carries the crackle of experimentation and learning, breeding new ideas and new approaches. It tells us that tomorrow can be better than today. If we are to fight back against the dead hand of protectionism, that jangle of anticipation and relentless urge to explore and improve may provide the rallying cry we need.
Eliot Wilson is a writer and strategic adviser