Trump, Bannon and the blinding lure of zero-sum thinking

As visual metaphors go, it wasn’t bad: Donald Trump ignoring advice and risking calamity by staring at the sun as the moon’s shadow passed across the US last week. Self-destructiveness has become a habit for this president — and for his advisers.

A recent example: former White House chief strategist Steve Bannon called Robert Kuttner, a prominent progressive journalist, to declare that his internal foes in the administration were “wetting themselves”. Shortly after Kuttner wrote about the conversation, Bannon was out.

But the truly harmful temptation here is not eclipse-gazing or indiscreet interviews. It’s another idea that Bannon proposed to Kuttner: that the US was in “an economic war with China”. It seems intuitive; many ordinary Americans feel that they cannot win unless China loses. But the world economy is not like a game of football. Everyone can win, at least in principle. Or everyone can lose. Falling for Bannon’s idea of economic war makes the grimmer outcome far more likely.

Like many dangerous ideas, there is some truth in it.

The American middle class has been suffering while China has been booming. Branko Milanovic, author of Global Inequality, has produced a striking elephant-shaped graph showing how, since the late 1980s, the rich have been doing well, as have many other groups including the Asian middle class. But earnings near — though not at the top of — the global income ladder have stagnated. That does not demonstrate harm from China: there is the fall of the Soviet Union to consider and Japan’s struggles.

However, another study, from David Autor, David Dorn and Gordon Hanson, has shown the lasting effect of the “China shock”. It was no surprise that competition from China put some Americans out of work, but Autor and his colleagues showed the effects were more locally concentrated, deeper and more enduring than expected.

These are important and worrying findings. But Bannon’s “economic war” is a cure far worse than the disease, and a misdiagnosis of how the world economy works. The US has still benefited from trade with Asia and attacking China — even metaphorically — will do nothing for the American middle class.

This is because it is surprisingly hard to find a zero-sum game in the real world. Most commercial transactions offer benefits to both sides, otherwise why would they take place at all? A trip to a restaurant provides good food and a pleasant evening for me, gainful employment for the waiting staff and the chef, and a lively environment for the neighbourhood. Everyone can gain. There are zerosum elements to the affair: every penny I hand over is a loss to me and a gain to the restaurant. But it is best not to obsess too much on such matters.

Zero-sum thinking apparently makes for good politics but is bad policy. The UK government has shown an unnerving tendency to treat its EU negotiations as a zero-sum affair in which the Europeans can “go whistle”, in the words of Foreign Secretary Boris Johnson.

In the Brexit referendum, the Vote Leave campaign turned on a zero-sum claim: we send money to the EU; we should spend it on ourselves. The form of the argument was as powerfully misleading as the details: the focus on membership fees pulled the attention of voters away from the idea of the EU as a club of co-operating nations.

Populists of all stripes focus on zero-sum arguments because they are easy to explain and emotionally appealing. Any toddler understands the idea of grabbing what someone else has; most adults prefer a situation in which everyone gains.

The theory of zero-sum games was developed by mathematician John von Neumann and economist Oskar Morgenstern in their famous book published in 1944. It works fine for analysing chess and poker, but by itself, zero-sum thinking is not much use to an economist who analyses a world full of win-win situations, of gains from trade.

Zero-sum thinking is not even that helpful to a military strategist. Von Neumann was a Cold War hawk: “If you say bomb the Soviets tomorrow, I say why not today?”, Life magazine quoted him as saying. “If you say bomb them at five o’clock, I say why not one o’clock?” He was a genius, but it does not take a genius to see the blind spot in his thinking.

The populists may lack the genius, but they have the same blind spot.

Not coincidentally, the focus on zero-sum rhetoric has drawn attention from more plausible solutions, many of which are purely domestic: higher-quality education, publicly funded infrastructure investment, antitrust action to keep markets functioning competitively and a more constructive welfare state that supports and encourages work rather than stigmatises and punishes idleness.

The biggest risk is that zerosum thinking becomes selffulfilling. Given oxygen by years of slow growth, it will lower growth further. By emphasising conflict, it will intensify it. The US is not in an economic war with China but could start one. That might help Trump. It would not help those he claims to defend. /©

THE FOCUS ON ZERO-SUM RHETORIC HAS DRAWN ATTENTION FROM MORE PLAUSIBLE SOLUTIONS