An expert's point of view on a current event.

Donald Trump Is Importing Asia’s Cronyism

The U.S. is being dragged toward the familial corruption other nations are trying to ditch.

US President Donald Trump and his daughter Ivanka walk to board Marine One at the White House in Washington, DC, on February 1, 2017. / AFP / NICHOLAS KAMM        (Photo credit should read NICHOLAS KAMM/AFP/Getty Images)
US President Donald Trump and his daughter Ivanka walk to board Marine One at the White House in Washington, DC, on February 1, 2017. / AFP / NICHOLAS KAMM (Photo credit should read NICHOLAS KAMM/AFP/Getty Images)

“My daughter Ivanka has been treated so unfairly by @Nordstrom. She is a great person — always pushing me to do the right thing! Terrible!”

—U.S. President Donald Trump, Feb. 8, 2017

“My daughter Ivanka has been treated so unfairly by @Nordstrom. She is a great person — always pushing me to do the right thing! Terrible!”

—U.S. President Donald Trump, Feb. 8, 2017

Donald Trump’s ascension to the White House has brought with it a level of personal and family aggrandizement unprecedented in modern American life. Trump appears willing and eager to use all the powers of the executive branch at his disposal to reward his family, his businesses, and his friends. In the first month of his presidency, Trump held three official meetings at his own resort, Mar-a-Lago, reportedly costing U.S. taxpayers $10 million. But more than that, Trump and his family are also using the power of the U.S. government to attempt to punish real or perceived enemies. Not only has Trump directly criticized companies, but Trump’s son-in-law, Jared Kushner, recently called upon the leadership at Time Warner to punish its subsidiary CNN for running negative stories about the president and his family.

Half a globe away, South Korean President Park Geun-hye faces impeachment for her own abuse of office. Park — the daughter of strongman Park Chung-hee, who ruled Korea from 1961 to 1979 — reportedly used her political power to secure admission to an elite university for the daughter of her close confidante, Choi Soon-sil. She also used pressure and threats to extort close to $100 million in “donations” to set up a think tank that would serve as a sinecure for her and Choi upon leaving office. Lee Jae-yong, the de facto head of Samsung — the country’s biggest and most important conglomerate — and grandson of its founder, was arrested in early February, charged with offering Park up to $38 million in bribes.

Park is hardly unique; during Suharto’s rule in Indonesia from 1967 to 1998, his three daughters and three sons became fabulously wealthy, with assets reportedly greater than $15 billion and shares in more than 500 companies. In 2015, the Indonesian Supreme Court ordered Suharto’s children to pay back $450 million in funds embezzled while their father was in power. Last year, Malaysian Prime Minister Najib Razak was accused by the United States of embezzling hundreds of millions of dollars from the government investment fund 1Malaysia Development Berhad and laundering it through the United States.

Yet East Asian countries are attempting to move away from societies run by personalities, not toward them. Even in China, dominated by a deeply entrenched Communist Party and an increasingly personalized leadership under President Xi Jinping, the official rhetoric talks of ending the “rule of man” and strengthening the “rule of law.” Trump, on the other hand, wants the American people to trust him and his family — not courts or experts. Punishing some companies and rewarding others will also be harder for Trump than for his Asian counterparts. Both the wider American economy and government sector are so large and diffuse that Trump cannot possibly have the same influence on American business and political life that Asian autocrats in smaller and more centralized countries have had on theirs. But he can push the United States in the wrong direction, toward an atmosphere of greater clannishness and cronyism that other nations are trying to leave behind.

Most East Asian countries — and indeed much of the globe — are characterized by cronyism. This process depends on the assiduous cultivation of personal relationships between elites, including through intermarriage, and the concentration of extensive economic power in political leadership. When access to the state is a main avenue to economic success, and the state is in the hands of an insular elite, businesses know precisely to whom to direct their political payoffs to influence policy decisions. Banks, for instance, loan money based more on their assessment of a particular person’s importance rather than the qualities of the project. When business and politics are based on people, not laws, in this way, the usual outcomes are erratic economic policy and extensive corruption.

Cronyism is typical in East Asia because the clan — or family unit — is still the fundamental building block of many of the region’s societies. Today, for example, Singapore, Japan, and both North Korea and South Korea have dynastic leaders. The past half-century of Philippine politics has been dominated by the Aquino-Marcos family rivalry. Ferdinand Marcos ruled from 1965 to 1986, first as democratically elected president and then as strongman. Marcos’s wife and son have served as senator, representative, and governor of the state of Ilocos Norte. Cory Aquino (1986-1992) and her son Benigno Aquino (2010-2016) have both served as president.

Political clans exist in America, of course: the Bushes, Clintons, Kennedys, and Roosevelts are perhaps the best known examples. But few have given their kinfolk as powerful a role as Trump has. Kushner, the president’s son-in-law, is officially a senior advisor to the White House; Trump’s daughter Ivanka has no formal role but is clearly important as his confidante. Ivanka attended meetings between Japanese Prime Minister Shinzo Abe and Trump, for example, and is regularly seen within reach of her father during events.

That makes the Trump clan look quite similar to ruling families in the former Soviet republics: Kazakh President Nursultan Nazarbayev named his daughter Dariga Nazarbayeva deputy prime minister, and just last week Azerbaijan’s leader named his wife vice president. But while family and personal interests will doubtless affect Trump’s decisions, other elements of his behavior may be reined in by factors that don’t limit Asian leaders.

Many East Asian autocrats have far more influence over tariffs, markets, labor, and the flow of finance than the American president. In a country characterized by crony capitalism, the exchange of favors for bribes is common knowledge. Businesses rise and fall depending on their ties to political power. Perhaps the most dramatic was the collapse of Hanbo Steel, a Korean steel company that grew rich on government contracts and expanded with loans given by government-controlled banks, in 1997. When founder Chung Tae-soo lost the support of then-President Kim Young-sam, the banks called in their loans. Hanbo went bankrupt within weeks, and Chung was convicted of bribery.

While Trump has considerable powers, he has fewer tools at his disposal to actually punish or reward companies because of the diffuse and decentralized nature of American political and business power. The American economy is so massive, and any one individual company so small by comparison, that even while Trump may attempt to bully certain companies, the effect will almost certainly be limited. Trump’s penchant for personalist deal-making in this sense is also a limitation: He can only bully a few companies at a time. The difference is that in the United States there are actually fewer levers that Trump can use to punish enemies. After Trump tweeted about Nordstrom in February, its stock price actually rose slightly the following week. Other companies have experienced very little actual impact from Trump’s rhetoric, as their stock price reflects the quality of their business, not the whims of the president.

Perhaps the biggest restraint on Trump is the rule of law. Asian cronies are coming from a political, business, and legal environment that is often only a few decades old, in countries whose self-governance sometimes dates only to the 1950s. In this developing legal and political environment, personal connections were far more practical, because rules have been vague, nonexistent, or rarely enforced. That made personal knowledge of a counterpart’s reliability, trustworthiness, or other attributes key to protecting or ensuring a working relationship. This absence of laws means that an introduction from a trusted counterpart is crucial to opening doors or providing information about what the government will do; officials sanctioning relations between certain trusted “friends of ours” can matter far more than any written contract.

Trump, on the other hand, is working within an environment in which the laws and rules and institutions and norms are not only clear but have worked quite well for decades, if not longer. As Trump attempts to ignore or work around the rule of law in the United States, he has already prompted pushback from the courts, the bureaucracy, Democrats in the legislature (if not yet Republicans), the media, and large swaths of the public. The United States is a classic weak state, and power devolves from the federal to state level and below. Trump has more constraints and fewer tools than may be apparent, certainly compared with Asian oligarchs.

America’s Founding Fathers went to great pains to devise a system that would prevent a tyrant from emerging. Despite the powers of the White House, the executive in the United States has far fewer levels of direct pressure at its disposal than dictatorships. While countries like South Korea, Indonesia, and the Philippines are dominated by a few large conglomerates, and their leaders have considerable means with which to punish or sanction friends and enemies, Trump’s direct impact on U.S. companies remains restricted to the influence of a tweet.

Trump’s tweets are a signal, but a signal that needs to be backed up with power and action. Trump certainly does have some tools at his disposal: It’s possible that he could ask the IRS to audit a company, impose various types of tariffs, or take other measures against a single business. Furthermore, Trump clearly does not seem burdened by any sense of propriety and seems to relish in breaking democratic norms. But at the same time, his moves are prompting pushback, including bureaucratic leaks and street protests.

American institutions, norms, and laws are about to face direct stress tests. Trump’s business is like an Asian-run family company — not a modern corporation — and he is now trying to lead the U.S. economy in this personalist direction, as well. Asians have experienced this kind of thing for decades, and it’s a path they want to leave behind. America would be wise to do the same.

Photo Credit: NICHOLAS KAMM/AFP/Getty Images

David C. Kang is Professor of International Relations and Business at the University of Southern California.