Recently, the New York Times opinion page has run an interesting series by some of its columnists in which they admit they were wrong about something. For Paul Krugman, it’s inflation. (He didn’t think it would be a problem.) For Bret Stephens, it’s Trump voters. (He says he thought too harshly of them.) And for David Brooks, it’s . . . capitalism:
It took me a while to see that the postindustrial capitalism machine—while innovative, dynamic and wonderful in many respects—had some fundamental flaws. The most educated Americans were amassing more and more wealth, dominating the best living areas, pouring advantages into their kids. A highly unequal caste system was forming. Bit by bit it dawned on me that the government would have to get much more active if every child was going to have an open field and a fair chance.
But writing for the Acton Institute, National Review contributor Samuel Gregg sets Brooks straight. In fact, many of the defects Brooks associates with markets are instead byproducts of government intervention:
Could it be, however, that Brooks has got at least part of the cause and effect the wrong way around? What if it is government—or, more precisely, people’s closeness to government and regulators—that at least partly drives large segments of the wealth inequality that Brooks is concerned about.
Gregg cites the cronyist economy that has been built up in and around Washington, D.C., as a prime example. In (and near) the Beltway, much of the wealth generated derives either directly or indirectly from government action, not from genuine market exchange. As Gregg notes:
The acquisition of such wealth in these parts of the country isn’t the result of the workings of capitalism. Instead, it is largely driven by “cronyism” or “crony capitalism.” This emerges when the processes of free exchange within a framework of property rights and rule of law are gradually supplanted by what I will call “political markets.” Instead of people prospering through freely creating and offering good and services to consumers at competitive prices, economic success hinges on people’s ability to harness government power to rig the game in their favor and secure preferential treatment from regulators, legislators, and governments.
And here’s the problem: The more you allow the government to intervene in the economy—whether through regulation, subsidies, tariffs, or industrial policy—to try and, say, diminish wealth differentials, the greater the opportunities for what economists call rent-seeking. This is when an individual or business tries to attain wealth by extracting resources from others (e.g., the government) but without actually doing much by way of economic productivity—in short, without adding value. There’s no reason why government interventions to address some of the wealth differentials and their effects that Brooks laments would not become yet another source of rent-seeking.
Gregg concludes that “at least part of the road to a more just economy and society” is “really about less government, rather than more.” In other words, apology not accepted.