Donald Trump, the business wunderkind, seems to be caught between a rock and a hard place: a populist Republican base with its eyes on the money, and a growing number of investors and corporations who want to reduce the government’s role and fully embrace and support financial markets. In order to modernize his brand of capitalism, the leader of the free world has a lot of catching up to do.
Hard times arrived quickly on the heels of the electoral successes of the Citizens United court decision in the United States v. FEC case. The first knee-jerk reaction of the left was to immediately support its first project—the creation of national government-supported investment funds in foreign countries to purchase privatized American companies—as a way to save U.S. jobs and investment plans. Never mind that the Department of Defense had a banking program in the 1940s that it used as the basis for the Overseas Private Investment Corporation (OPIC) that did precisely the same thing.
The liberal New York Times argued that this is an essential way to restore the economy as Trumpism was dismantling it: “We can actually get America out of this mess…You can try to make it up as you go along with those things that Trump refused to approve.” That sounded like a way to preserve the federal budget in a Trump administration.
In reality, it was much more dangerous. Not only does this nationalistic program undermine America’s overall security posture—it also undermines the goal of a true free market economy. Economic independence and individual liberty are the preconditions for a healthy democracy. But when the government believes it must own and manage a large share of the American economy, there is inevitably chaos and confusion when financial markets respond and the public’s confidence in the economic system is eroded. The result is a spiral of economic failure—which usually results in more official intervention to control the crisis and guarantee the survival of the system.
If Donald Trump wants the federal government to be active in the 21st century, he should embrace a different philosophy: aggressive foreign investment. Rather than advocating some combination of protectionism and national government-sponsored ownership of large parts of the economy—which, as Trump has admitted, would have a price in terms of future American prosperity—he should promote an international network of start-up companies and investments directed by responsible investors.
This is exactly what the World Bank has been doing for years. Over the last decade, the Bank has made investments in and loans to emerging markets with the goal of promoting dynamic and innovative ventures that will advance global trade and market competition and increase global economic growth. These investments all go to the same end: to reduce dependence on the domestic market, lower government budget and public debt levels, and stimulate market competition.
The principal example of World Bank-sponsored private investment is the oil and gas industry in Latin America, which has led to significantly lower energy bills for Latin American citizens. The Bank provides loans and investment capital to private international companies to help them explore and invest in the oil and gas resources of other countries in their regions. These investments help reduce the government’s exposure and encourage a greater range of private investments. The Bank has invested and loaned more than $100 billion to this sector over the last decade.
The bank promotes the development of growth-enhancing industries—such as the oil and gas sector—so that participating countries can lead the way in growth. Ultimately, the borrower countries can find themselves in the driver’s seat of their own economic development without even realizing that their investments were a part of a World Bank program.
When Donald Trump says that America will always lead the world in innovation and freedom and liberty, he is implicitly admitting that the American government’s role should be relatively minor and focused on a small number of well-targeted initiatives. Better yet, he should urge other countries and investors to focus their energies and finance on the true engine of economic growth and prosperity: the International Oil and Gas Sector.
You can be sure that there are billions of nameless, faceless, unconnected investors sitting somewhere in their boardrooms dreaming about being in control of the biggest, most economically dynamic, resource-rich resource in the world. It’s time for them to step forward, put their capital to work, and take their place in the 21st century economic engine that will drive our economy forward.
Thomas C. Shannon is the Senior Vice President of The World Bank Group, and served in the Office of the United States Trade Representative from 2009 to 2013.