Fred Smith, R.I.P.

F red Smith, the great champion of capitalism who has died at the age of 83, was not your usual capitalist. To be sure, he wore an “Enjoy Capitalism!” T-shirt and enjoyed its products, such as cigars and Oreos, and at the same time he was also deeply appreciative of egalitarian values. An environmentalist, but not a big-government environmentalist, he believed strongly in the critical role of markets in protecting the natural world. A booster for the importance and rights of corporations, he was no corporatist, often reminding people that firms lobby for regulation whenever it benefits their narrow self-interest. He was, in short, a deep thinker about the nature of economic liberty, and we need more of his sort of thinking today.

Fred grew up in rural Louisiana, the son of a lockkeeper on Lake Pontchartrain, and imbibed the cultural egalitarianism of the great melting pot of New Orleans, where he attended Tulane University (and met his soul mate, Frances, forever after known as his “sainted wife, Fran”). As he was fond of quipping, from a young age he knew he wasn’t a racist so he assumed he must be a liberal. He moved to Washington to help make the world a better place at the Environmental Protection Agency — and soon realized that the government-centered approach to the environment was at best wasteful and at worst deeply harmful.

The insights he gained into regulatory economics inspired him to found the Competitive Enterprise Institute in 1984. Working from his kitchen, he was essentially an intellectual entrepreneur, with his own start-up — and the funding difficulties that come with it. When the nascent organization entered the start-up’s funding valley of death, he bemoaned the state of its finances to Fran. She reminded him that he’d anticipated this in his business plan. “Yes,” responded Fred, “but now it’s happening!”

CEI survived, I am happy to say, and is still a flourishing organization under the auspices of Fred’s successor, Kent Lassman. Under Fred’s leadership, CEI established itself as the cutting edge of free-market thought on regulatory policy, particularly in areas such as energy and the environment, competition, and innovation. Fred called himself a “despairing optimist” — despairing at the state of politics but always optimistic that humanity’s capacity for innovation would win out. This optimism shone through on any encounter with him. His geniality, gregarious nature, and winning smile enabled him to make what he called “strange bedfellow” alliances on issues with the likes of Ralph Nader. No one who met him would ever forget him.

Three areas of Fred’s intellectual work are especially important today. First and foremost is his recognition of the role of government failure in our problems. Fred would often say that our problems came not from market failure, which often takes the blame, but from a failure to have markets. He traced this to the Progressive Era of the early 20th century, which he believed derailed the evolution of free-market solutions to problems by imposing layers of government regulation and direction. He was deeply influenced by Austrian political economist Joseph Schumpeter’s idea of creative destruction and how Schumpeter warned that a class of intellectual elites would seek to impose its values on the wealth creators, leading to a demise of the benefits of capitalism.

In many ways, the concept of President-elect Donald Trump’s envisioned “Department of Government Efficiency” (DOGE) and its leadership by wealth-creating entrepreneurs Elon Musk and Vivek Ramaswamy vindicates Fred’s advocacy. Sweeping aside the apparatus of bureaucracy is the surest way to allow market experimentation to resurface. As Fred said, “Civilization is the trial-and-error process in which these experiments are validated or rejected.”

Second is Fred’s championing of access to affordable, abundant, reliable energy as a vital component of that civilizational process. We are seeing in Europe a real-time experiment in what happens when a society makes energy unaffordable. Involuntary deindustrialization is happening across the continent, and the less well-off are finding that necessities such as winter home-heating are becoming unaffordable. Paraphrasing William Jennings Bryan, Fred would say, “You shall not crucify mankind on a cross of green.”

Balancing the importance of affordable energy with the need for environmental protection was a central part of Fred’s championing of “free-market environmentalism.” As he saw it, capitalism is vital for environmental protection for three reasons. Capitalism demands greater efficiency in the use of energy and reducing waste; it relies on property rights, which incentivize protection (“You don’t spit on your own doorstep,” as he would put it); and by making people wealthier, it encourages them to devote more resources to the environment. Indeed, Fred believed that the greatest risk for the environment was the growth of anti-energy policies that derail this process.

Yet these ideas can be difficult to convey, which is where the third of Fred’s insights comes into play. Fred was a huge believer in arguing not on the basis of graphs and statistics, but in terms of values. Beyond Washington wonk-world, arguments about gross domestic product and other abstractions carry no weight. As he would often say, “People aren’t stupid because they’re stupid; they’re stupid because they’re smart. And if you try to make them smart, you’re being stupid.”

What liberty advocates must do is appeal to people based on their motivating values. For some Americans this will be liberty, but for others it is community, and for yet others fairness. All these value groups must be appealed to with different strengths endemic to capitalism. Fred always felt that classical liberals and egalitarians, for instance, have much more in common than political arguments suggest, and so he devoted considerable effort to making the sort of arguments now evoked by “supply-side progressives” such as Ezra Klein and Matt Yglesias.

As should be apparent from this brief survey, Fred’s ideas were motivated by love for his fellow man, which is why the collected volume of his essays that CEI published for his 80th birthday was titled “Labor of Love.” Indeed, Fred’s life was a living example of Adam Smith’s belief that “man naturally desires, not only to be loved, but to be lovely.”

Fred was a lovely man, and we shall miss him terribly.