Scott Lincicome writes:

When the populist strongman Juan Perón ran Argentina’s economy from his presidential palace in the mid-20th century—personally deciding which companies received favors, which industries got nationalized or protected, and which businessmen profited from state largesse—economists warned that the experiment would end badly. They were right. Over decades of rule by Perón and his successors, a country that had once been among the world’s wealthiest nations devolved into a global laughingstock, with uncontrollable inflation, routine fiscal crises, rampant corruption, and crippling poverty. Peronism became a cautionary tale of how not to manage an economy.

President Donald Trump seems to have misunderstood the lesson. His second term has begun to follow the Peronist playbook of import substitution, emergency declarations, personal dealmaking, fiscal and monetary recklessness, and unprecedented government control over private enterprise. And, as with Argentina’s Peronism, much of U.S. economic policy making runs directly through the president himself.

Trump’s tendency toward Peronist policy is strongest on trade. Central to Perón’s economic vision was an “import substitution industrialization” strategy, or ISI, that used tariffs, quotas, subsidies, localization mandates, and similar policies to push Argentines to produce domestically what they’d previously imported more cheaply from abroad. The approach was intended to fuel domestic growth, but it instead created insular and uncompetitive manufacturing industries saddled with high production costs, bloated finances, and rampant cronyism. Perversely, it also crushed Argentina’s globally competitive agricultural sector by diverting resources away from it and toward protected industries. Argentinian consumers suffered from higher prices, unavailable products, and lower overall living standards. [Continue reading…]