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Trump's Distributive Bargaining on World Trade.

3 min read

I saw Professor David Honig on the “Last Word with Lawrence O’Donnell” a couple of days ago, and I found this transcript of a similar interview he did on NPR.  Basically, Honig states that Trump has practiced “distributive bargaining tactics” when it comes to real estate, and Trump is now using that same tactic when it comes to world trade issues.  What is distributive bargaining?

HONIG: Distributive bargaining is what some people will call win-lose bargaining, when the parties don't have any mutual interests at all. So what they're looking for is what we call in negotiations value taking. There's only one amount of pie. And once I get some, and the other side gets some, whoever gets the most wins.

This style of bargaining worked well for Trump because he had the money and could screw over the other guy in deals.  How so?  As previously reported by some in the media — but repeatedly dismissed by Trump supporters, Trump simply didn’t pay contractors for the work they did.  He made the contractors take him to court where Trump would then offer substantially less than the work to settle the case.  An example of how this works is the following:

Here’s the simple math. Suppose a supplier contracts with a hotel owner to provide carpeting for a new hotel for $100,000. The supplier fully performs. The hotel owner refuses to pay. To recover, the supplier has to go to court, and the most he can possibly win is $100,000. But paying his attorneys fees is going to run him $30,000, leaving the supplier with a recovery worth only $70,000 on his $100,000 contract. As a practical matter, the supplier may lose his whole profit margin.

So an unprincipled hotel owner might say to the supplier, “Look, you’re up a creek. I’ll pay you $75,000. Sure, you’re screwed, but that’s better than you can do by going to court, so be reasonable.”

And this is what Trump did time after time to contractors.

Normally, an ethical businessman would want to work with reliable contractors, but Trump didn’t care about working with reliable contractors or repeat business.  Trump had plenty of other contractors to keep screwing over.  The only time this bit him some in the ass was when he declared multiple bankruptcies and screwed over the New York bankers who were dumb enough to give him loans.  

There are a lot more small contractors in the world than their are major New York banks, and the New York banks stopped lending Trump money when they figured out Trump’s distributive bargaining tactics of being a deadbeat.  It’s why he finally ended up in bed with the Russians, quite literally.  I know.  An unpleasant image.

Now, Professor Honig brings up a very salient fact about applying distributive bargaining on the world stage.  There is only one China, Canada, Mexico, and European Union.  Those are countries that Trump is trying to screw over.  Or as Professor Honig states:

Sometimes, you have to deal with people again. And if you've taken them, or they feel like they've been taken, they're not going to deal with you again. You can do that with a cabinet maker who put the cabinets in your hotel or casino because you can find another cabinet maker. But you can't find another Canada. You can't find another China.

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