U.S. President Trump, seen here at General Motors’ Milford Proving Grounds on Monday in Milford, Michigan, has a model for international relations that borrows more from Marshal Stalin than George Marshall, Tony Keller writes.Andrew Harnik/Getty Images
The European Recovery Program may have been history’s greatest act of enlightened self-interest.
Commonly known as the Marshall Plan, after then-U.S. Secretary of State George C. Marshall, it saw the United States pay to rebuild the continent after the devastation of the Second World War. Between 1948 and 1951, Washington jump-started the European economy with more than US$13-billion in aid to 17 countries.
To put that in perspective, U.S. gross domestic product in 1950, measured in 1950 dollars, was US$300-billion. The bill for the aid program was worth more than 4 per cent of the American economy.
U.S. GDP today tops $30-trillion a year – which means the Marshall Plan, measured in today’s dollars and relative to today’s U.S. economy, would be worth US$1.3-trillion.
Some of the aid came in the form of loans, but most of it was given as grants. The Europeans used much of it to buy U.S. exports, including food, machinery and raw materials to rebuild a shattered continent.
The virtuous circle benefited Europeans and Americans alike. What followed was a multi-decade economic boom – known as Les Trente Glorieuses in France and the Wirtschaftswunder in Germany – and a cycle of rising prosperity that enriched the whole world, not least Americans.
The Soviet Union refused to allow Eastern Europe to access the Marshall Plan. In the years that followed, the growing gap between the wealth and freedom of Western Europe and stagnation and dictatorship in the East became so stark that the Soviets had to build a wall, to prevent Eastern Europeans from escaping immiseration.
Which brings me to the present troubles.
The President whose slogan is Make America Great Again has an ignorance of, and a hostility to, the things that Made America Great. Donald Trump’s model for international relations borrows more from Marshal Stalin than George Marshall.
The Detroit Shakedown is the latest example.
Ottawa picked up the entire $6.4-billion tab for the Gordie Howe International Bridge, and that had a sound Marshall Plan logic. Canada’s cost of construction could be recouped over time through tolls, while Canada and the U.S. would both see permanent economic gains from a new bridge enabling more, faster and cheaper cross-border trade. Everybody wins.
Mr. Trump’s preferred arrangement is not that. It is the win-lose of the extortion racket.
Not wealth creation – wealth appropriation.
Not “let’s prosper together,” but, “hands up, this is a stick up.”
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He saw the bridge, and his power to block its opening, as his latest opportunity to demand a payoff. He got Ottawa to agree in principle that, for the first 15 years of the bridge’s life, half of all net revenues after expenses will flow into a Trump administration-controlled slush fund, with Canada only getting its full share of toll revenue after.
Because the deal is short, thin, and layered on top of the original agreement between Michigan and Canada that Mr. Trump refused to honour, it’s still unclear whether Canada has given up a lot, a little, or nothing.
Because it’s a Donald Deal, it’s also unclear whether this 15-year deal can last even 15 weeks.
From the certainty and stability of a hegemon that practices long-time allyship, we have moved to the instability and unpredictability of America as an impatient hustler, always chasing new protection rackets, or a new chance to fleece old marks.
The President has hit other allies with similar, but far larger, shakedowns. Last year, he slapped Japan with a 15 per cent tariff and threatened worse unless Tokyo pledged to invest US$550-billion in the U.S. The terms envision Japan taking on all of the financial risk, with the U.S. taking most of the profits.
In the first year of the Trump administration, erstwhile allies were pressured into committing to invest US$5-trillion in the U.S., according to the Washington-based Peterson Institute for International Economics.
It’s like a Marshall Plan in reverse.
A reverse Marshall Plan is in fact what Stalin imposed on Eastern Europe. The U.S. sent aid to Western Europe; Stalin sent railcars to his newly conquered territories and carried away tribute.
Trumpian economics is not Keynesian economics or Milton Friedman economics. It’s Genghis Khan economics. It’s Vladimir Putin economics. It’s wealth extraction, not wealth creation.
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As for the funds pledged to Mr. Trump as part of his bid for a reverse Marshall Plan, very little has materialized. Japan has invested almost nothing so far. South Korea pledged $350-billion last year, and has since been dragging its feet.
Mr. Trump treats agreements as written in disappearing ink on biodegrading paper, and so do his counterparties.
In the years after the Second World War, the countries of Western Europe joined NATO and the Washington-led global trading system voluntarily and eagerly. The governments and peoples of Eastern Europe, in contrast, entered the Warsaw Pact and the Soviet economic bloc at the barrel of a gun.
Mr. Trump has dismantled the trust and goodwill that made Canadians, Europeans, Japanese and others happy to let Washington lead what we called the free world.
It can be rebuilt, but it will have to be rebuilt in a different form. Mr. Trump has removed the cornerstone.
Editor’s note: This article has been updated to state that in the first year of the Trump administration, allies were pressured into committing to invest US$5-trillion in the U.S. A previous version incorrectly stated the investments totalled US$5-billion.