“Every single decision we made was wrong.” That’s how Nvidia founder Jensen Huang described 1995 in the life of Nvidia. Crucial about the wrong decisions was that Nvidia’s first of many recessions followed them as Huang and a slimmed-down-by-layoffs team fixed their mistakes.
The Nvidia anecdote is just a comment that in a free economy, recessions are the norm. No doubt economists have tried to apply an inapplicable “macro” overlay to recessions, but in reality they’re the very necessary, very healthy, but at times very painful process whereby individuals and businesses acknowledge their mistakes (including the wrong hires for businesses) on the way to fixing them.
The realization of errors is the path to recovery, which means recessions are recovery because they’re a signal of individuals and businesses coming to terms with their mistakes.
Keep this in mind as economists begin to throw around the word “recession” as a possible consequence of President Trump’s irresponsible, anti-progress and anti-freedom implementation of global tariffs. The glum recession talkers insult the undeniable good of them when they associate government with individuals and businesses fixing themselves.
That is so because what the U.S. economy is enduring or may endure has nothing to do with individuals and businesses correcting mistakes made in healthy, growth-oriented fashion. Instead, what we call an economy is perhaps contracting as would be expected when government obnoxiously and cruelly inserts itself into the production process.
Reducing economics to what it is, simple human action, prices of goods and services decline with great rapidity alongside the increase in the number of hands and machines at work in the creation of the good or service. Free trade is brilliant for the “economy” simply because it implies cooperation that democratizes access to everything. Even better, the cooperation among man and machine substantially increases the odds that the men and women in the production equation will get to do the work most associated with their unique skills and intelligence.
Tariffs exist as taxes on globalized cooperation between men and machines, which saps the natural spreading of production across as many necessary hands and machines around the world as needed. The latter slows the natural decline of prices when people are free to produce, plus it slows the natural productivity advances that invariably emerge when people are doing what they do best.
What’s important about all this is that Donald Trump restraining the natural path to work divided is not bringing on a recession, rather he’s once again slowing economic activity with the insertion of himself into the production process. Getting more specific, Trump’s tariffs amount to an attempt to centrally plan and localize economic activity through the imposition of taxes on globalized economic activity. No, that’s not a recession. That’s central planning from the proverbial Commanding Heights.
Which should concern Trump supporters, along with Trump himself. The last time the president pursued central planning of human action on this scale was in March of 2020 when his fear of a virus caused him to institute national lockdowns that rushed tens of millions of Americans into unemployment and impaired or bankrupted millions of businesses. Trump followed his monumental mistakes borne of panic with $3 trillion worth of federal spending meant to subsidize the lockdowns he deemed necessary.
The lesson from 2020 and now is that government is slow growth personified. With Trump in the early days of substituting is genius for the markets once again, it’s evident that the economy could be contracting once again. Just don’t call it a recession.
