Analysis

Trump may be inaugurating an era of market failure in economics and ideas: Don Pittis

The idea that U.S. president-elect Donald Trump can make America great has caused markets to soar. But when truth has become so fragile, can free markets function?

Credibility gap becomes a chasm as president-elect leaves business wondering what's true

During his press conference last week, U.S. president-elect Donald Trump demonstrated his lack of conflict of interest with a pile of file folders. But in a post-truth presidency how will business know what to believe? (Shannon Stapleton/Reuters)

Cynics may believe that business is based on a pack of lies, but at every level of business, from buying a used car to a billion-dollar stock deal, truth is precious.

Investors have been pouring their money into stock markets on the assumption that U.S. president-elect Donald Trump has been telling the truth.

They may be disappointed.

There is increasing evidence that not only has truth been set aside, but the institution created to discover truth has been damaged.

It was the libertarians' hero John Stuart Mill, in his 1859 book On Liberty, who first integrated the principle of the economic free market with the concept of the marketplace of ideas.
The title page of Areopagitica, a pamplet in favour of free speech by the poet John Milton, printed in 1644 without the permission of censors. (Wikipedia)

He was drawing on the poet John Milton's famous rationale for free speech. Milton's big idea was that the freedom to speak and write means the truth will come out.

"Let (Truth) and Falsehood grapple," wrote Milton. "Whoever knew Truth put to the worse, in a free and open encounter?"

Deny, deny, deny

But suddenly falsehood has a new champion. 

"He speaks in falsehoods all the time. They report him and give credibility to his falsehoods," Saskatchewan lawyer Garrett Wilson said shortly after watching Trump's news conference last week.

Wilson is the author of Deny, Deny, Deny, a book about the long trial and conviction of Saskatchewan politician Colin Thatcher for the murder of his ex-wife JoAnn Wilson.

The title of the book comes from the advice of a divorce lawyer to clients whose wives desperately want to believe them. Wilson draws a parallel between those cheated wives and Trump's supporters.

He worries that, after an entire election campaign of giving credibility to Trump's incredible statements, it will be hard for the media to signal when as president he is "speaking misinformation." 

"I don't know how the hell they're going to do it," says Wilson. "I think the horse is out of the barn on that one."
Critics says the media may have contributed to Trump's lack of truthfulness after an election where the priority was finding the scandal for the next day's headline. (Shannon Stapleton/Reuters)

After a campaign of juicy headlines, last week's press conference showed that most reporters weren't necessarily seeking truth, says media critic Jasmin Mujanovic.

"The media was … trying to get him to say something scandalous so that they would have leads for that evening's news cycle," Mujanovic told Laura Lynch on CBC Radio's The Current on Friday.

Freedom of speech and the freedom to buy and sell in fair markets have become deeply integrated into the U.S. concepts of liberty and equity, so much so that those freedoms are just assumed.

Orwellian rules

As investors have discovered in countries with authoritarian governments including Russia and China, when a government can declare what is true, business information becomes unreliable. 

There is a danger the U.S. may be moving that way.

Under the new Orwellian rules, scandals are dismissed as fake news in the face of evidence.

Freedom from conflict of interest is demonstrated with a pile of file folders.

Climate change is declared a hoax and vaccinations the cause of disease despite the weight of scientific proof.

Trump tweets a denial that he mocked a disabled reporter in the face of video of him mocking a disabled reporter, and the denial continues to be reported by supportive media groups.

Media organizations that report facts — in this case CNN, which reported the existence of spy documents about Trump  — are denied the media's life blood, the ability to ask questions.

Meanwhile, middle-of-the-road media is compelled to report both sides, truth and falsehood as truth, to demonstrate its lack of bias. 

Politicians are known for bending the truth. In the 1960s that was labelled the credibility gap. Under the Trump presidency can we expect a credibility chasm?

After all, as Garrett Wilson says, Trump got away with it for an entire campaign and won. Why change?

Trump has reminded us how fragile institutions of democracy can be. Voting, the free press, government regulation, all falling before a barrage of untruth. Will the courts survive?

Already there is evidence that free markets have been distorted. Now Trump is promising tax cuts that will tilt the balance further. Will the border tax help or hurt?

Experts have questioned whether such short-term measures are economically sustainable

Business enthusiasm stalling?

After the election, markets showed enthusiasm for Trump. But last week that enthusiasm seemed to stall.

In business it is crucial to know who you can trust. With Trump so willing to play fast and loose with the truth, can he be trusted?

Is Trump really acting in the interests of the U.S. economy and U.S. business? Or, like countries without trusted institutions, is he in someone's pocket? Or is he just acting for Donald Trump?

Without a free press allowed to ask hard questions, how can investors be sure?

The institution of free speech and the market of ideas have been grappling against falsehood for nearly 400 years since Milton proposed them. We can only hope they can sustain themselves during the Trump presidency.

As for free markets, they can be fooled for a long time. But they have a way of coming back to reality with a bump.

Follow Don Pittis on Twitter @don_pittis

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About the Author

Don Pittis

Business columnist

Don Pittis was a forest firefighter, and a ranger in Canada's High Arctic islands. After moving into journalism, he was principal business reporter for Radio Television Hong Kong before the handover to China. He has produced and reported for the CBC in Saskatchewan and Toronto and the BBC in London. He is currently senior producer at CBC's business unit.