Friday, April 14, 2017

Trump, Chinese currency manipulation and the MOAB

Yup, this will be another post about Thomas Schelling's The Strategy of Conflict.  Remember Schelling?  This is a blog about Schelling.  Or, it might as well be.

I covered a lot about Schelling in my "Political science & craziness" series last August, but the key point for today is that bargaining power is all about demonstrating the credibility of your threats, and you demonstrate the credibility of your threats by carrying them out.  That's only difficult when carrying out your threats hurts you.  That's when it is most important to carry out your threats to give your future threats credibility.

On the campaign trail, Trump promised/threatened to issue a formal declaration that China was a "currency manipulator" as soon as he came into office.  The claim was that China was artificially depressing the value of its currency to give it a trade advantage.  There were two problems with this.  First, it hadn't been true in years, and second, doing so would sour relations with an important country.

See where I'm going with this?  If you want to demonstrate the credibility of your threats, Schelling-style, you kind of have to follow through on that one.  It will hurt, but that's... the point.  It may have been a stupid promise to make (not as dumb as promising to make Mexico pay for the wall, but, well, c'mon...), but at least it is within Trump's power to follow through.  The fact that it hurts to follow through is the point.  It would show credibility.  Trump decided not to follow through.  In doing so, he undercut his credibility.  He made the right policy decision, but at the cost of his credibility.

Then, there's the MOAB.  The "mother of all bombs."  Trump dropped a big bomb on Afghanistan.  He thinks this shows credibility.  In Schelling's terms, it doesn't.  Why not?  Because it doesn't hurt him to do it.  He incurs no cost.  He just thought it would make him look like a tough guy.  The point about demonstrating credibility, in Schelling's terms, is that it is hard to do when carrying out a threat hurts you.  On China and the MOAB, Trump got it backwards.  Branding China as a currency manipulator, even though it would have been wrong and stupid, is what would have demonstrated credibility, not dropping a MOAB.  He dropped a MOAB instead of following through on a promise/threat that would have hurt him to carry out.

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