The Weekly Sift

making sense of the news one week at a time

An authoritarian economy is a bad economy

Some Democrats want the party's message to center on preserving democracy. Others say no, we should run against the Trump economy. What if we could do both at the same time?

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When I talk to liberal activists, the issue that most scares them is Trump's assault on democracy: denial of due process, flouting of court orders, siccing the Justice Department on his personal or political enemies, misusing the military by marching troops into Democratic cities like Los Angeles, usurping Congress' power of the purse, sending masked thugs out to racially profile the population and whisk people off into what we might as well call concentration camps, extorting personal payments out of businesses by threatening them with government power, trying to keep power (even if the voters disapprove) by gerrymandering Congress, and so on.

But I also often hear another point of view: Maybe we ourselves care about democracy, but democracy issues are too abstract to run on in the 2026 midterms. At any given moment, most Americans aren't using their due-process rights, and aren't counting on court orders to protect them. If troops are turned loose on some far-off city they never visit, or if some politicians play an unfair game against other politicians, what's it to them? Instead, Democrats should run on "kitchen table issues" that hit people in the pocketbook.

Right now what they’re feeling is the everyday things that are affecting them: the cost of groceries, gas prices, paying for rent. That is the number one issue; we need to be focused on that.

More and more, though, I'm becoming convinced that Democracy-or-Economy is a false choice, for a simple reason: An authoritarian economy is a bad economy.

Think about the countries that are further down the authoritarian road than we are, the ones often described as Trump's models: Putin's Russia, Orbán's Hungary, Erdoğan’s Turkey, and so on. None of them are places you'd want to go to start a business or begin your career. Before long, Trump's America won't be such a place either.

Let's think about why that is.

No checks and balances. We often talk about checks and balances as a procedural virtue, the kind of thing good-government types get excited about for reasons no one else understands. At times Americans even lament about all the checks and balances, because they make it hard to get things done.

But if we think about this purely economically, checks and balances serve a very practical purpose: error correction. When a leader gets a really bad idea in his head and begins to implement it, people who occupy other positions of power in the government can make him change course before things go too far. As the implications of the bad idea start showing up in the economy, the people who are suffering can appeal to other centers of power for relief.

In an autocratic system, on the other hand, no one can tell the autocrat he's wrong. Policies that almost everyone else knows are destructive can nonetheless proceed all the way to disaster. Take Turkey for example:

A principal factor in Turkey’s poor economic performance over the past decade was President Erdogan’s misguided belief that interest rates were the cause of rather than the cure for inflation. This induced him to lean heavily on the Central Bank of Turkey to cut interest rates even at a time when inflation was rising. He did so by firing a succession of central bank presidents and by appointing a central bank board that totally complied with his desire for low interest rates.

It was only when inflation soared to 85 percent and when the Turkish lira was in free fall that Erdogan was forced to make an abrupt monetary policy U-turn.

Similarly, Putin's war against Ukraine (whatever you think of it morally or even militarily) has done enormous damage to Russia's economy. Mere weeks into the war, it became clear that expectations of a quick and easy victory had been delusional. At that point, Russia would have been much better off if someone else in the government -- a leader in the parliament, perhaps -- had been able to go to Putin and say, "This isn't working. You're going to have to figure a way to change course."

Anyone who tried that, though, faced a serious risk of being dropped out of a high window. So more than three years later, a war that nearly everyone knows is a bad idea churns on.

We're seeing something similar happen now with Trump's tariffs. They're doing precisely what nearly all economists said they would do: raise prices and slow growth. Pointedly, they're not doing what Trump said they would do: bring manufacturing jobs back to the US. In fact, while manufacturing employment in the US surged during Biden's administration, it has fallen during Trump's.

Not only are the Trump tariffs a bad idea in general, they've been implemented in the worst possible way: erratically. Tariffs work by changing the market's expectations. The only way a tariff might convince a company to go through a years-long process to move a factory to the US is if the company is convinced the tariff will still be there when the new factory opens. But when tariff rates seem to depend on what Trump had for breakfast, who knows what to expect two or three years from now?

As with Erdoğan and Putin, though, no one can tell Trump this simple fact. He has filled his administration with yes-men, and Republicans in Congress are afraid to challenge him. No independent agency or rival branch of government can stand in his way. And so we charge forward towards an economic disaster.

No single person is always right. So a country needs to have a way (or maybe many ways) to correct its leader when that leader is wrong. Checks and balances allow democratic governments to correct their errors, but autocratic governments can stay on the wrong path for a very long time.

Crony capitalism. If the foolishness of Trump's tariffs is so obvious, you might wonder why he doesn't see it himself. The answer is simple: Emergency laws passed by Congress under previous administrations (at least if you believe Trump's interpretation of those laws, which is being tested in court) give the president the power to raise or lower tariffs at will, without any further input from Congress or anyone else.

In other words, tariffs are a place where Trump could seize autocratic power, so he has. His ability to raise tariffs or grant exceptions to them give him enormous power over some of our largest corporations. He can reward those who play ball with him and punish those who don't.

In the textbooks, capitalism is supposed to work like this: The way to get rich is to come up with better and better ways to produce products and services that people want. Build a better mousetrap, the adage says, and the world will beat a path to your door.

In an autocratic system, though, the way to get rich is to get on the good side of the autocrat -- maybe through flattery, through political support, or by cutting him in on the action. If you do, then you can expect lucrative government contracts, or maybe regulations you get to ignore will handicap your competitors, or maybe you'll be allowed to cheat your customers without them having any recourse against you. On the other hand, if you displease the autocrat, your government contracts might suddenly disappear.

Think about all the times you've heard someone referred to as a "Russian oligarch". Have these rich men invented anything? Developed anything? Marketed some new product? Of course not. They are rich because they are allies of Putin. And when Putin decides he doesn't trust them any more, they fall -- sometimes literally.

Again, ignore the morality for a minute and just focus on the economics. Whatever problems a textbook capitalist economy may produce, it does have one signature advantage: better mousetraps. Economic decisions are made for economic reasons, so they tend to turn out better economically.

Not so in an autocratic system, where economic decisions are made to bolster the autocrat's power.

For example, one of the most important regulatory decisions governments face at the moment is what to do with crypto-currencies. Maybe they're the future of finance, or maybe they're a bubble waiting to pop. Maybe they will turn out to have benefits if they're regulated properly, but huge downsides if they're not.

But how can we expect wise regulations under these circumstances?

$TRUMP (stylized in all caps) is a meme coin associated with United States president Donald Trump, hosted on the Solana blockchain platform. One billion coins were originally created; 800 million remain owned by two Trump-owned companies, after 200 million were publicly released in an initial coin offering (ICO) on January 17, 2025. Less than a day later, the aggregate market value of all coins was more than $27 billion, valuing Trump's holdings at more than $20 billion. A March 2025 Financial Times analysis found that the crypto project netted at least $350 million through sales of tokens and fees.

Here's how things have worked out in Hungary:

Although Hungary’s GDP reaches roughly 77% of the EU average, lifting it above several low-income EU nations, its households nonetheless remain poorer in consumption terms. This discrepancy highlights the fact that economic output isn’t translating into real benefits for Hungarian families.

Behind the numbers lies a painful reality: under Viktor Orbán’s increasingly authoritarian and pro‑Russian Fidesz regime, Hungary has been systematically pillaged. State-owned industries have been hollowed out, public subsidies redirected to political allies, and EU funds commandeered by power networks close to the government. Meanwhile, ordinary Hungarians contend with low real wages, high inflation, brain drain, and a hollowed middle class—classic symptoms of wealth siphoning from citizens into elite pockets.

Bad information. Information is the lifeblood of a market economy; the more accurate and trustworthy a country's economic information is, the better its economy will work.

Conversely, the less trustworthy economic information is, the more cautious economic decision-makers will be. If, say, a car company thinks that incomes are rising, it might be inclined to increase production, figuring that richer citizens will buy more cars.

But what if its executives suspect the government is just making up the numbers that show incomes rising? Then they'll be slower to react, even if incomes actually are rising. That kind of sluggishness will percolate through the economy.

We already started down that road last week, when Trump fired the head of the Bureau of Labor Statistics because BLS' June jobs report (accurately) made his economy look bad. Similarly, Trump doesn't want to deal with climate change, so his Department of Energy is now issuing reports that say it's not a big problem. Past National Climate Assessments have been taken off government web sites, and the Energy Secretary says they're going to be revised -- presumably to paint a picture Trump (and his political allies in the fossil fuel industry) finds more palatable.

It would be bad enough if bad information from the government caused unsuspecting people to make bad economic decisions out of ignorance. But within the government itself, decision-makers will be afraid to make good decisions, because those very decisions might communicate that they doubt what the autocrat is telling them.

The dystopian picture. If you want to see how the pieces might come together, look at a dystopian vision by the blogger Umair, "America’s Path Towards an Authoritarian Economy".

There’s a vicious spiral that nations collapsing into autocracy tend to follow. It goes like this. Capital controls, price controls, informational vacuums, monetizing the debt, defaulting on it, and crashing the currency.

He paints a picture of what might come next: Trump's tariffs increase companies' costs, so they will want to raise prices. But then Trump will pressure them not to raise prices, because inflation makes him look bad.

So to stem this inflationary tsunami, autocrats tend to put in place price controls—autocrats tell CEOs you’d better not raise prices this much, on this or that. Often, they’re hard, dictated by an “economic board” or equivalent body. In America’s case, they’ll probably be softer: Trump dictating to boardrooms, threatening them, bullying them, coercing them into not raising prices.

If you can't raise prices, you have to cut costs -- in other words, lay off workers. But rising unemployment also makes the autocrat look bad, so he'll lower interest rates in an attempt to increase economic activity. (That's assuming Trump has taken control of the Federal Reserve, which he is trying to do.)

But when interest rates go lower than the inflation rate, nobody wants to own your currency. So the dollar falls. That starts investment capital fleeing the country, which the autocrat then tries to make illegal: No, you can't invest your money in more stable countries.

What I’m trying to teach you is that autocratic collapse becomes a vicious spiral. It’s a very real one, which we’ve seen around the world, from Latin America to Asia and beyond. And it has a classic pattern, which goes like this. Tariffs beget price controls. Price controls beget unemployment. Inflation surges, the economy slows, and demand shrinks, usually dramatically. Autocrats cook the books to try and hide it all. Markets stop functioning, and crashes and crises erupt. ... All of this is very real. This isn’t a far-off prediction: it’s an observation. This vicious spiral has already begun.

I'm not as fatalistic about this as Umair is: The tariffs are just getting rolling, the bad results are already becoming apparent, and there's still time for the checks and balances we have left to function.

But the path he describes is in front of us, and we need to get off of it -- not just for moral or idealistic reasons, but because it leads to an economic catastrophe.

So we don't need to choose Democracy or Economy as the center of the anti-Trump message. We democracy to save us from the autocratic economic spiral Trump has started.

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