The free market of Goldman Sachs is not the free market of the lemonade stand.
From the immediate abandonment of the Trans-Pacific Partnership (TPP), to the recent “hire American buy American” executive order, to the strong likelihood of serious and important steps to renegotiate NAFTA, there is much in President Trump’s actions thus far in his term to encourage his economic-nationalist base.
Far less encouraging, however, is the sorry state of public discourse about the president’s economic-nationalist policies, particularly on trade. Ideological opponents of the president’s economic-nationalist agenda have barely graduated from superficial charges of “protectionism.” And those who are formerly opposed, such as Speaker Paul Ryan, have fallen conveniently silent on the trade issue, offering no public acknowledgment or principled justification for the apparent (and likely temporary) departure from GOP orthodoxy.
Even the president’s most vocal proponents have yet to advance substantially beyond the indispensable yet incomplete rhetoric of an “America First” trade policy that is “free yet fair.”
What follows is a brief, concentrated attempt to disentangle some of the ideological assumptions underlying the present rhetoric in the hope that this will serve as a first step toward a more mature and relevant discourse on economic policy.
First, it will be useful to examine typical critiques leveled at various economic-nationalist policies.
The Standard Critique: Lower Costs Benefit Consumers
Criticisms of Trump-style economic nationalism — particularly criticisms from the conservative and libertarian intelligentsia — tend to conform to a specific structure. That is, such criticisms emphasize the direct benefit to consumers in the form of lower-priced goods when corporations cut production costs by, say, outsourcing production overseas or “insourcing” cheap labor via immigration.
Tariffs, immigration restrictions, and other such impediments to the free market might serve the special interests of workers in some specific industries, but they do so at the expense of the general consumer. The great economist Milton Friedman made such arguments with special eloquence and persuasiveness, as do most conservative and libertarian pundits who understand themselves to belong to the tradition of Friedman’s thought.
The problem with criticisms of this sort is not that they are wrong but that they are incomplete. Indeed, it is quite true that lower production costs due to outsourcing and immigration can translate into lower prices for consumers.
A comprehensive cost-benefit analysis of economic-nationalist policies on trade and immigration, however, would take into account not only the higher prices consumers might face as a result of tariffs or immigration restrictions but also the higher unemployment and lower wages that would result from the absence of a given protectionist policy.
Such analysis would examine both the concentrated burden on those directly put out of work and the dispersed burden on taxpayers from the associated social and economic consequences of higher unemployment. A sober, undogmatic assessment along these lines would provide a more accurate picture of the winners and losers of various protectionist policies from the perspective of corporations, taxpayers, consumers, and workers in the affected industries.
With a few welcome exceptions, critics of economic-nationalist policies are not undertaking this sort of dispassionate cost-benefit analysis.
To understand why this is the case, we must recognize the ideological underpinnings of much of the orthodox conservative resistance to economic nationalism. Toward this end, we shall turn to a brief analysis of the “free market” framework that informs much of orthodox conservatism’s rhetoric and ideological commitments.
Disentangling the ‘Free Market’: Goldman Sachs vs. the Lemonade Stand
According to the “free market” ideology in question, restrictions on economic activity — even “fair” restrictions designed to protect American workers — are incompatible not only with free trade but also with free-market principles generally and with the associated individual “freedoms” and “liberty” that unrestrained economic activity represents.
Within this broader ideological framework, “free market” economic policies pertaining to trade, financial regulation, and labor markets fall within the same ambit and implicitly assume the moral and philosophical significance of policies pertaining to individual liberty, as though the “free market” of Goldman Sachs, Walmart, and the multinational corporation were the same as the “free market” of the family small business or the neighborhood lemonade stand.
This is not to impugn the ideals of individual liberty, self-reliance, competition, and entrepreneurial initiative often (and often correctly) associated with the free market. Rather, this is to suggest that the unreflective association of these ideals with the preferred “free market” trade and immigration policies of large corporations now obscures more than it reveals about the desirability of various economic-nationalist policies.
It is entirely possible therefore to support tariffs, immigration restrictions, and various other restrictions on the free market in a manner that benefits the American worker and that is also consistent with the highest respect for individual freedom, enterprise, self-reliance, and other virtues of capitalism.
Certain economic-nationalist restrictions on major corporations might in fact be the most conducive route to the proper cultivation of individual liberty and enterprise.
In many cases (though not all), certain economic-nationalist restrictions on major corporations might in fact be the most conducive route to the proper cultivation of individual liberty and enterprise. Indeed, the genuine and organic connection between individual self-reliance and enterprise, on the one hand, and absolutist laissez-faire capitalism, on the other, seems to weaken as the business grows larger and larger. That is, the larger the corporation, the more it is governed by the harsh logic of economies of scale, by which per-unit costs decrease as they are spread out over a larger number of goods, and the cynical necessities of lobbying industry. These features are at best indifferent to freedom and individual liberty.
To repeat our preferred comparison, the individual virtues associated with a child’s neighborhood lemonade stand, or, say, with building a thriving local business are not necessarily those encouraged by dominant, international corporate behemoths of retail, agribusiness, and Silicon Valley.
Free-Market Ideology and the Cold War
As timelessly important as the virtues and freedoms associated with capitalism are, it is equally important to understand the Cold War context that gave rise to the ideology according to which those virtues came to be associated with a wide range of economic policies relevant to large corporations and financial institutions.
The Soviets who posed an existential geopolitical threat to the United States embraced a generally classical Marxist philosophy that was both an economic and a moral doctrine. In the context of the Soviet threat, it’s perhaps understandable that great economic and political thinkers such as Milton Friedman would help to fashion a competing ideology that was not optimally tailored to accommodate a nuanced appreciation of economic-nationalist concerns. Their more pressing concern was to defend against the threat to individual liberties, which came primarily from the concentrated power of Soviet-style socialist economies.
But today’s threats of concentrated power do not seem to conform to the “government dangerous, private sector benign” picture as easily as they may have during the Cold War. This is because 1) the distinction between public and private seems to no longer apply to many of the most powerful sectors of the economy, and 2) new forms of technology have enabled equally dangerous concentrations of power to accrue in the private sector (think of Silicon Valley). So, with the end of the Cold War, we must reevaluate the relationship between economics and liberty.
Today’s threats of concentrated power do not seem to conform to the ‘government dangerous, private sector benign’ picture as easily as they may have during the Cold War.
Furthermore, several structural features in the economy have accelerated since the end of the Cold War that severely threaten the middle class, whose robust health is often considered indispensable to a culture of individual freedom. Even from an enterprise standpoint, a safety net such as a Universal Basic Income — a notion that is anathema to many libertarians and conservatives today — might turn out to encourage a kind of entrepreneurialism that is especially compatible with the high-risk, high-reward, winner-take-all pay-off structure of the 21st-century economy.
Conservatives and libertarians who remain shackled to a Cold War economic ideology ought to take note that Milton Friedman himself stated that his chief purpose was not to advocate for one specific economic agenda over another but rather to protect individual liberties and free enterprise from the threats of concentrated power. If the nature and context of such threats have changed in the post-Soviet decades, then an economic-nationalist reconsideration of the relationship between individual liberty and economic policy might conform to the spirit, if not entirely the letter, of Friedman’s thought.
Of course, economic nationalists themselves must take note of the extent to which lingering ideological baggage from the Cold War may undermine the effectiveness of their discourse, much of which emphasizes (correctly) that contemporary economic policy has devolved into “crony capitalism” — a corrupt version of the free-market ideology of the Cold War. While this is true and well worth repeating, a sophisticated and sustainable vocabulary of economic nationalism must go beyond this critique to address the coherence and continued relevance of a free-market ideology that, for all its virtues, may not be optimally suited in its traditional form to navigate the emerging challenges of a 21st-century economy.
We must address the special challenges that American workers face in the contemporary economy, but also — and perhaps more important — we must effectively defend individual liberty, enterprise, and freedom. These ideals face emerging threats not foreseen by the Cold War conservative and libertarian giants on whose shoulders we all stand.