Once an Economy Switches from Rules to Deals, It’s Hard to Go Back Americans of all political affiliations will miss the checks and balances that Donald Trump is trying to dispense with. By Filipe Campante and Ray Fisman March 28, 2025 https://www.bloomberg.com/news/arti...y-when-deals-replace-rules?srnd=homepage-asia What Happens to an Economy When Deals Replace Rules In 1976, Mao Zedong succumbed to Parkinson’s disease and passed the torch to Deng Xiaoping. After the Mao-led disasters of the Great Leap Forward and the Cultural Revolution, Deng took China in a very different direction. His reforms in the 1980s are credited with helping the country achieve decades of enormously rapid growth. A shift of that magnitude — whatever its direction — is much more common in regimes ruled by a single leader, which political scientists call personalistic political systems. Because China had few constraints on the top leader, the shift from Mao to Deng mattered a lot. The country’s fate hinged on the whims of the guy in charge. Citizens of democracies like to point out that personalistic political systems, like the one Mao built and handed to Deng, don’t deliver for their citizens as well as democracies do. In the long run, on average, there’s a good chance that’s true. But the full story is more subtle. History is filled with examples where personalistic systems seemed to work for a time. China under Deng, Singapore under Lee Kuan Yew, South Korea under Park Chung-hee, Indonesia under Suharto: There are numerous instances of rapid economic growth under autocratic and personalistic leadership. What the evidence does suggest is that personalistic political systems lead to greater variance in economic performance. In other words, the range of possible outcomes is much wider. In a2005 study, economists Benjamin Jones and Benjamin Olken analyzed the impact of political leaders on economic performance by examining what happened in the wake of leaders’ unexpected deaths. There were no systematic post-death economic shifts following the demise of democratically elected leaders — like, say, when Lyndon B. Johnson took over for John F. Kennedy. But the death of autocrats led to marked shifts in economic outcomes: sometimes for the better, and sometimes for the worse. When leaders operate without constraints, you have to rely on luck: Maybe you will get a “good” leader who manages things well. But maybe you will get a bad one. Without constraints, the range of possibilities widens and the risk of disaster increases. History suggests that good luck in leaders seldom lasts. The Unconstrained Presidency The first two months of Donald Trump’s presidency have proceeded at a blistering pace, including more than 90 executive orders. President Trump has fired independent officials, effectively shut down agencies like USAID, picked fights with judges and empowered Elon Musk to act as the government’s newly appointed Cost-Cutter in Chief. Designated as leader of the Department of Government Efficiency — a loosely defined entity of unclear legal status — the centibillionaire has been operating across a remarkably wide collection of agencies and departments, accessing their financial records and pushing for massive layoffs. These disparate maneuvers have one thing in common: They are all part of a remarkable shift toward unilateral action by the president and the people he picks to work on his behalf. While many US presidents have attempted to claim new powers for the executive branch, the Trump administration is unique in the extent to which they are pursuing maximalist claims of executive authority, as well as in their willingness to challenge the courts. It’s also notable how little pushback Trump has received from the legislative branch. A Republican-controlled Congress has largely abdicated from any sort of institutional dissent with respect to the president’s initiatives. (The judicial branch has been active, in comparison, but with limited enforcement ability.) The Trump administration’s agenda, paired with the lack of pushback, amounts to a bid to concentrate enormous power in the hands of the president and his hand-picked agents (like Musk). If successful, this would replace a system of rules-based policymaking across branches with decision-making by a few individuals. Are Americans Feeling Lucky? To understand the risks of personalistic systems, it’s worth considering the absolute best-case pro-Trump and pro-Musk scenario. Since Musk in particular has been empowered by Trump to act seemingly without constraint, let’s focus on him. Suppose you believe that Musk’s success in the private sector translates perfectly to public administration — and that Musk is correct in his diagnosis of the current state of the public sector. Perhaps you therefore expect a big boost to US gross domestic product as a result of Musk’s untrammeled power. Even if the bet on Musk were to pay off as handsomely as his most fervent acolytes hope, what happens after that? Should we expect that we will always be so lucky as to have the right person invested with those unchecked powers? In fact, if you really think Musk is uniquely qualified to manage government, you can only expect the next person to be much worse. One response might be that if Musk’s successor proves to be ineffective or worse, electoral discipline can be relied upon to limit their overreach. That is, if a future president is a bad leader or empowers one, they can be then kicked out by voters. But this ignores another layer of uncertainty: Once you move to a personalistic system, democracy can no longer be taken for granted. You cannot simply remove checks and balances and hope that politics will still take place under the same rules as before. From Rules to Deals The US government is now veering toward the kind of governing-by-deal-making that Trump, who fancies himself as a master of the “Art of the Deal,” no doubt favors. This contrasts with the rule of law, whereby legislation is passed and regulations are put in place through a well-ordered policymaking process. The first risk of a personalistic system, as we’ve described, is that too much hinges on who’s in charge. The second is that no single leader, no matter how smart, can make every decision. When rule of law is replaced by the whims of the executive, that process filters down into everyday decision-making. This was documented by researchers Mary Hallward-Driemeier and Lant Pritchett in a study titled, “How Business is Done in the Developing World: Deals versus Rules.” While there’s politicking and uncertainty in every government, they describe why low-income countries are more likely to be dominated by deals. Take a business trying to get a construction permit, one example from their paper. A rules-based approach would specify what’s required upfront. The process might be quick or slow, but it would be predictable. There is no negotiation and therefore less room for outright corruption. But in many low-income countries, the authors observe, the rules are merely the starting point for a negotiation — deal-making, if you will — between business and government. Governance by deal-making creates the sort of uncertainty and restricted economic opportunities that are harmful to investment and growth; only the well-connected need apply. This is an inevitable consequence of an unconstrained leader at the top. The lack of clear rules filters down, empowering thousands of dictatorial bureaucrats along the way. Where the rule of law languishes, corruption flourishes. The Cost of the Deal In an unpredictable, deal-making world, the way to succeed is to curry favor with whomever is in power. That may not sound so bad if deal-making replaces, say, stifling taxation — it could even be the grease that makes the wheel of business spin faster. But the evidence suggests this is not the case: A 2000 study by economist Shang-Jin Wei argued that corruption discourages investment far more than taxes, precisely because it is fickle and uncertain. The political implications are even more concerning than the economics. By placing extraordinary powers in just a few individuals at the top of the deal-making hierarchy, they can become very difficult to dislodge. When success in business requires being in the good graces of those in power, leaders can wield that authority to build their own political resources — from campaign money to favorable media coverage. Furthermore, unchecked authority raises the stakes of holding on to power. If whoever gets to be in charge can push whatever policies they like, and if it is hard to remove them once they get there, each side of the political aisle will see electoral losses as existential challenges. This, in turn, can add yet more political instability. And as the late, great economist Alberto Alesina documented with colleagues in the mid-1990s, political instability is associated with lower economic growth. In short, the lesson from social science is that good economic policy depends as much on process as on substance. If the US takes steps down the road toward an unchecked, personalistic system of policymaking, it will carry very steep long-term costs. America has the most prosperous economy in world history, and it is no coincidence that it was built on a relatively impersonal, rules-based system. If it’s destroyed, it may prove near impossible to rebuild.
The first country has caved to the USA on tariffs, It's Vietnam. I suspect that Thailand will be next,
"Just pay and you can go free.'' said the orange blob , who accused other countries of sending drug dealers and criminals and rapists into the country. Violent felon freed by Trump now accused of attacking 3-year-old A convicted drug dealer whose sentence President Donald Trump commuted is back behind bars after he was charged with assaulting a 3-year-old child and violating his supervised release, The New York Times reported Friday. It was the fifth time Jonathan Braun has been arrested since Trump commuted his 10-year sentence as he left office in 2021, according to the report. The decision came as a “last-minute” clemency request that made its way to the president through Braun’s family connection with Charles Kushner, the father of Trump’s son-in-law and White House adviser Jared Kushner, the Times added. But as of Friday, Braun was back in prison after a federal judge in Brooklyn agreed with prosecutors and refused to allow him to be released from custody, noting his flight risk and risk to the community. Braun has been accused of string of offenses, which include “swinging a pole that contained intravenous bags at a nurse; threatening a synagogue congregant who had asked him to stop talking during services; punching his wife and 75-year-old father-in-law; and grabbing a nanny’s breast as he touched himself,” the Times said. He had been sentenced in 2019 by Matsumoto on charges of smuggling and distributing marijuana after he copped a plea with prosecutors. But Braun’s legal woes haven’t just been on the criminal side. A judge last year ordered him to pay a $20 million fine in a case brought by the Federal Trade Commission for claims that he engaged in a predatory lending scheme, according to the Times.
Trump said this? The damage isn't only from the actual tariff but Trump flip flopping on a daily basis. Is this a good tactic in your opinion?
vietnam and thailand, and even asean bolck are china's cutout, xi is laughting to the bank. asians work and save money and buy gold.