The Corner

Economy & Business

Debating Capitalism

A trader works at the New York Stock Exchange, January 8, 2019. (Brendan McDermid/Reuters)

Henry Olsen, a pal and former colleague, offers in his Washington Post column a useful contribution to the important debate happening on the right over the relative importance of free markets and free enterprise. Olsen criticizes NR’s recent issue, “In Defense of Markets,” for inadequately grappling with the problems markets cause. He criticizes me as well, arguing that I am a “market fundamentalist” who seems “to see nothing — absolutely nothing — about today’s capitalism to dislike.”

Olsen’s column highlights the confusion present in this debate. To argue that I see nothing to dislike in today’s market outcomes is absurd. I am, to take just one example, concerned about low wages and low rates of employment among lesser-skilled workers, and have advocated for years for an increase in federal earnings subsidies to make work pay and to increase workforce participation.

But perhaps by “capitalism” Olsen means the system in which growing the economy is a chief — though not the only — goal of economic policy, and in which some of the fruits of economic growth are redistributed to advance specific goals that are decided upon through politics.

Here, too, it is silly to argue that I’m fully satisfied. But I can’t think of a better system. And if Olsen has a candidate to replace it, I’d like to hear about it.

A feature of this system particularly relevant to this debate: In a growing economy, you can do better without me having to do worse. Growth allows advancement by some without requiring retrenchment by others. A second feature: Growth creates the financial and political space necessary for the enactment of the spending programs Olsen seems to like.

Those on the right who are downplaying economic growth are turning their backs on quite a bit, including the mechanism to address the concerns — most prominently, about the plight of the working class — they declare.

Olsen writes: “Other factors, such as social order and family formation, are also worthy goals to which pure economic efficiency or growth must bend at times.” Who is seriously arguing against this? Who is seriously arguing that we should scrap all regulation and zero-out all spending programs for the sake of maximizing the economy’s rate of growth?

But I think by “today’s capitalism” Olsen probably means the principles of free enterprise, including a commitment to free trade. He criticizes opinion leaders who, in his view, “should have noted that voters in the supposedly free-market party had just resoundingly rejected” their arguments against tariffs and in favor of free global trade when they nominated Donald Trump to be the 2016 GOP presidential candidate.

It’s true that Mr. Trump won the GOP nomination and the presidency. But the efficacy of tariffs and the reasonableness of protectionism are not determined by voters. Tariffs will hurt U.S. consumers through higher prices, and bilateral trade deficits are not necessarily a mark of national weakness. These statements are true regardless of whether they are popularly accepted.

Olsen might counter that even if the president and his supporters are wrong, many voters still think they are right. To which I’d argue: maybe. Support for protectionism has so far been largely abstract. If the president heats up his trade wars — for example, if we apply significant tariffs on imports from Mexico, or increase our aggressiveness against China — then we’ll see how popular a slowing economy and rising prices are. We’ll see how popular protectionism really is.

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