Re-industrialization. It’s a hot topic.
In fact, if you scan earnings call transcripts, you discover that management mentions of “reshoring” are pervasive, where that means literally off the charts.
A figure from Bloomberg Economics making the rounds on Tuesday showed a near 90-degree inflection in “conversations about reshoring” as tallied by an AI-powered “topic trends” tool. Have a look:
The veritable explosion in re-industrialization chatter reflects patriotic fervor in the C-suite, where management’s eager to replace cheap overseas labor with hugely expensive American workers, who’ll happily toil from dawn to dusk in a sprawling network of factories and sweat shops newly-constructed from sea to shining sea.
I’m just joking. This is shareholder capitalism. Reshoring is garlic to vampires in the C-suite. At best, it means putting the national interest ahead of profit margins. At “worst,” it means putting workers ahead of stockholders, and in the religion that is capitalism, that’s nothing short of heresy.
If you haven’t listened to the latest episode of Odd Lots, you should. It’s called “How Bankers Spread the Gospel of Capitalism.” Scott Bok, who I’m sure’s a nice enough guy, was preachin’ it, goddammit. “You can talk about different constituents and so on,” he said, but by now, Americans “take for granted” that corporations’ purpose in the world is “largely” to create “shareholder value.”
He’s right. Americans probably do think that. But that’s a little like saying most Americans think government’s hopelessly corrupt. It’s not a good thing. In fact, a lot of Americans think shareholder capitalism’s bad. Evil, even.
“You know, I’ve been so thoroughly enmeshed by the messianic message of shareholder value, I almost have a hard time imagining a world in which companies don’t perceive that, and governments and citizens don’t perceive that as the mission — to make the stock go up,” Joe Weisenthal chimed in, responding to Bok.
Tracy Alloway, God bless her, gently noted that post-pandemic, society’s starting to rethink the notion that the only “constituents” who matter are shareholders. I wish she’d pressed the issue, but I understand why she didn’t.
If you want to explain why both Republicans and Democrats are gravitating to the respective poles (Donald Trump on the right and AOC on the left), the “Gospel of Capitalism” is a good place to start. For lack of a more polite way to put it, people are sick of it.
I’m torn on this, frankly. On one hand, forced de-globalization’s tantamount to developmental backsliding. It’s a terrible idea, it won’t work and all that’ll come of it is (more) frustration at home and acrimony towards the US abroad.
On the other hand, I chafe at the Gospel of Capitalism and specifically at the notion that the sole purpose of the modern corporation is to enhance shareholder value. That simply isn’t true, and where it is — i.e., where that notion’s taken to its (il)logical extreme — it ends up being ruinous for society.
While I plainly (and avowedly) abhor Donald Trump, I have to admit there’s something satisfying about watching mighty corporate America — avarice incarnate — grapple for the first time with an authoritarian in the Oval Office.
Obviously, Trump’s thinly-veiled allusions to physical coercion against, say, Walmart, aren’t credible. Nor would I want them to be. But he’s done just enough these last four months to make a lot of Americans ask how far he’s willing to go in pursuit of an autocratic fever dream.
That’s a terrible thing in almost every context. But I do get a chuckle out of knowing the likes of Walmart can’t completely dismiss Trump when he says, as he did a few days ago, “EAT THE TARIFFS. I’ll be watching.”
Sure, the implicit threat’s completely empty. And yet, just as the rest of us can no longer dismiss sundry “science fiction” scenarios pertaining to, for example, habeas corpus and due process, corporate America has to ask itself, What if it’s not?
“Sep 13, 1970 — A Friedman doctrine?- The Social Responsibility of Business Is to Increase Its Profits. By Milton Friedman. Sept. 13, 1970.”
“Derek’s Two Reminders– Populism is Not necessarily Business Friendly and Capitalism is not Patriotic”
Way back in early January I reminded people about both as Trump’s second term approached.
I worried that judging from his campaign promises, the starry-eyed Investors espousing the bullish narrative of Trump being business-friendly were likely to be disappointed. He had laid out a populist agenda which Wall Street “analysts” chose to overlook. Tax cuts and deregulation was all they saw. My concern was dismissed as being rather “out there”, but it is starting to look like the president was right when he said that he is just doing what he promised. So tariffs and price gouging by pharma and now Walmart are now (back) on his hit list. Which, as you noted, is not a good place to be for investors.
President Trump is being frustrated by Derek’s other observation that “Capitalism is Not Patriotic.” The first glaring example was the reaction to his call for the oil drillers to Drill Baby Drill. Most drillers are proving reluctant to do so, despite promises of relaxed methane resitrictions etc. Unlike Putin, MBS or Xi he cannot simply order them to spend shareholder money on loss-making capacity expansion. That must irk him.
Now let’s see if companies can justify bring production back onshore in the context of the Friedman Doctrine.
But, I confess, I do hope that he follows through on his dislike of PBMs. He is right about them!
“Unlike Putin, MBS or Xi he cannot simply order them to spend shareholder money on loss-making capacity expansion”
I mean, he could. He’s discovered there really aren’t any insurmountable obstacles to autocracy in America. All the institutions are paper tigers. The question’s whether he wants to go “there” or not. He plainly does on immigration, but he seems to vacillate on everything else.
I think the main obstacle is just time. It’s kinda too late. Trump’s just too old. Lukashenko’s been president since 1994. Putin’s run Russia for a quarter century. Saddam ran Iraq for more than 30 years. Gaddafi ran Libya for 40 years. I guess if Trump lives to be 100, this can “work,” but it’s really tough to start your dictatorship at 80. I think that, more than anything else, is why a lot of folks still don’t take this especially serious.
It’ll be the next guy or gal who knows where all the paper tigers are and how to punch holes in them that should concern us
CEOs have figured out how to play to Trump. Announce something big, let him take credit, watch him get distracted by the next thing, then quietly drop the idea.
Some sectors are more exposed, because they depend on basically discretionary actions by the WH and agencies. Most of the tech sector is – they need tariff relief, permission to export, approvals for projects, help with DOJ, etc. If Trump decides to tariff semi imports under 232 or ban AI chip exports, the chances of getting a court to overrule are low.
Other sectors are also exposed. Biopharma needs FDA actions, tariff relief, etc. It, like tech, also has little chance of drumming up public support.
But some sectors are not particularly exposed. How exactly could Trump force WMT to eat his tariffs? He and the federal govt have little power over WMT, that I can see. Arguably WMT has more power over them, via prices.
With WMT it feels like Trump is desperate. I believe he knows he can’t control their prices. His threat to them was week by his standards. It feels more like he’s begging. He actually believed his no strategy tariff plan would work, but it’s been a train wreck. Doge, mass government layoffs, medicaid cuts, recklessly hacking key government agencies, denying FEMA payments are time lag landmines that are going to start exploding holes in the economy. His belief in shareholder capitalism is one of his many glaring weaknesses because to Trump there is only one shareholder – himself.
“How exactly could Trump force WMT to eat his tariffs? He and the federal govt have little power over WMT, that I can see.”
The same way that the PRC leadership did when they were quarrelling with Japan over the Senkaku/Daioyu islands. Promote citizen boycotts and turn a blind eye to worse. It’s not like Americans are totally adverse to such actions – look at the Tesla, Bud Light and Disney boycotts in recent times. The US examples were not officially driven, but who knows what might happen now?
+1.
You’re right that WMT has more power over Trump they he has over them. If they posted tariffs on all receipts, the public and the press would go nuts and Trump would cave even harder.
This is why he’s attacking them first. It’s a confidence game whereas as long as corporate leader are moronic cowards and cave, don’t call him out, he wins. As soon as they stand up to him he’s toast and somewhere deep down he knows it.
“How exactly could Trump force WMT to eat his tariffs?”
He could say “Eat these tariffs or I’ll send federal agents to your home office, arrest you and throw you all in prison for the rest of your lives.”
I mean, look, that’s not going to happen obviously, but the point of the latest Weekly is that we keep moving the goal posts re: what he can/will do.
The other point of the latest Weekly was that Trump’s inclinations are a weird mix of Orban-style, autocratic coercion and full-on dictator fantasies.
The question isn’t so much whether Trump would arrest Walmart’s management team, but rather who’d stop him if he decided to? That’s a serious question: If federal agents showed up at the home office tomorrow and hauled them all away, who would stop them? Local police? No. The Pentagon? No. Hakeem Jeffries? Give me a break. SCOTUS? Maybe after the fact, but they have no real enforcement capabilities.
For me, the issue is what he’s exposed about America — namely, that the checks and balances aren’t sufficient. They have no teeth. If Trump were actually a Saddam figure, he could usurp this whole thing overnight. Nothing’s stopping him physically. Nothing.
As far as I know, no one in the Administration has ruled out a national emergency, martial law, deployment of the military on US soil. Even if they had, who would believe them. The attack on the media has already started. Is it a bridge too far to shutdown a key handful of them. An article this morning reports on how CDC communications have been effectively shuttered. The threads holding American democracy are fraying, to say the least. Are bond yields key, if foreign countries and investors decide treasuries aren’t a safe haven.
I started reading “The Road to Freedom: Economics and the good society” by Stiglitz last summer. I didn’t finish it yet but I feel like he summarized why neoliberalism failed and was always going to and proposed a better alternative.
I’m not surprised you didn’t finish your Stiglitz yet. I couldn’t stand him and I had to finish his books as assigned.