Capitalism, Corporatism, and the Free Market

The intra-party debate over economics is off and running on the Right. There is a strong temptation, however, to distill the argument into a binary framing between capitalism and some form of “anti-capitalism,” socialism, or statism. Such framing obscures the central issue.

No one on the Right rejects the free market. Or capitalism. In fact, the three individuals largely responsible for provoking this debate—Oren Cass, whose new project American Compass seeks to “restore an economic orthodoxy that emphasizes the importance of family, community, and industry to the nation’s liberty and prosperity,” and Senators Marco Rubio (R-Fla.) and Josh Hawley (R-Mo.), both of whom raise social criticisms of government policies that they claim prioritize corporate profits over the needs and humanity of the individual, their families, and communities—have all taken pains to emphasize that capitalism is essential to achieving the American dream. They just think the American dream has more inputs to it than a surging stock market.

In fact, the robust debate taking place on the Right is not at all a question of whether we should embrace capitalism or socialism. That’s settled in favor of capitalism. It’s about how the free market economy can best contribute to individual liberty and human flourishing.

But to have this conversation, we’d better acknowledge that our free-market economy, to a great extent, reflects the choices of policymakers.

There’s a peculiar tic on some parts of the Right that encourages people to treat the free market as if it has arisen spontaneously and exists separate and apart from any government action or policy. They decry any step by the government, even those taken to sustain the free market, with exaggerated terms like statism, protectionism, or even outright socialism. (Take your pick.)

But this viewpoint—that the government should not act—fails to align with the reality of our economy, in which the government acts constantly.

For example, our so-called “free trade” policy, in fact, is a jumbled mess of government interventions and choices made by policymakers over the years to favor powerful interests. President Trump has been criticized for using tariffs to bring China to the trade negotiating table. These tactics temporarily will disadvantage American corporations that manufacture their cheap products in China, and thus some have decried them as violating free-market principles.

The president’s ultimate and oft-stated goal, however, is to force the Chinese to open up their market and provide a fairer playing field for American manufactured goods. Adam Smith, in his free-market classic, An Inquiry into the Nature and Causes of the Wealth of Nations, addresses this:

There may be good policy in retaliations of this kind, when there is a probability that they will procure the repeal of the high duties or prohibitions complained of. The recovery of a great foreign market will generally more than compensate the transitory inconveniency of paying dearer during a short time for some sorts of goods.

It is also noteworthy that Smith goes on to address who should be making these choices—the legislative or executive power:

To judge whether such retaliations are likely to produce such an effect, does not, perhaps, belong so much to the science of a legislator, whose deliberations ought to be governed by general principles which are always the same, as to the skill of that insidious and crafty animal, vulgarly called a statesman or politician, whose councils are directed by the momentary fluctuations of affairs.

Similarly, the huge tech behemoths—Facebook, Google, and Twitter—only exist because of a special government protection given to them by Congress in 1996. Few industries in America have it quite so good.

But some conservatives defend tech’s special government protection, arguing that tech cannot exist without it, and that reform of the policy constitutes “government coercion” (the glaring contradiction in this argument—that it’s anti-free market or coercive to change the policy governing an industry whose growth was empowered by said policy—gets ignored).

Insofar as Facebook, Google, Twitter, and YouTube allow users to post their own ideas largely free from interference, this argument has some merit, and therefore they arguably should not be held responsible for material posted on their sites by users. The  argument breaks down, however, when they begin censoring conservative voices, banning and shadowbanning viewpoints, politicians, and thought leaders.

In 1984, the government stepped in to break up the telephone giant AT&T, which government policies helped create. But AT&T’s 60-year streak of near-total dominance was stifling innovation in the telecom industry. In 1996 (within the same bill that created Big Tech’s special privileges) Congress again intervened in the market to force phone companies to open up their lines to competitors. These interventions by the federal government arguably acted to enhance the free market, and spurred critical innovation in the Internet and wireless marketplaces.

The point here is not to suggest that the heavy hand of government is a good problem solver or that we need more of it. There are thousands of examples to the contrary, and I firmly believe the opposite. Rather, it’s to point out that the “free market” is not some existential, a priori creation, somehow untouched and unsullied by government policy.

Our free market is a function of our own design. It does what our government policy encourages it to do.

Not everyone questioning these priorities is questioning the inherent worth of the free market, or of capitalism, and suggestions that assume this are rather blatant mischaracterizations. Instead, people are taking issue with the parameters and interventions that policymakers themselves have set.

Corporatism Is Not A Free Market

And, to that end, conservatives like Hawley and Rubio are calling into question policies that may have become inimical to individual liberty and human flourishing—in particular that, for the last 50 years, the American economy has been designed to ensure that large corporations get larger.

This has been the bipartisan policy consensus for so long that corporatism—the policy choice to prioritize corporations and their profits—is now conflated by some with the free market. It’s become accepted orthodoxy that excessive policy deference to corporate behemoths is somehow the definition of “free.”

If the goal of a free market is to ensure personal and economic liberty, it is time to reassess the deference our policies give to corporations. Major banks, many of which exist because of the 2008 taxpayer bailout, and flourish thanks to government regulations and tax breaks, are now refusing to lend to firearm manufacturers or to finance gun purchases. Six major banks will no longer provide depository services for small businesses that work with Immigrations and Customs Enforcement.

Microsoft, Yahoo, Google, Facebook, YouTube, Apple, and Dropbox, all of which are the beneficiaries of favorable government policies, willingly gave the National Security Agency and the Federal Bureau of Investigation access to users’ audio, video, photos, and documents as part of secret spy programs.

Google, in particular, helped the Chinese government censor and spy on its own citizens, and still facilitates the purchase of apps used by the Chinese government to suppress its Muslim minorities. So does Apple.

Why should those who cherish liberty have to choose between being ruled by a tyrannical government or a tyrannical mega-corporation?

National Review founding editor William F. Buckley, Jr., rejected this premise when he proclaimed he would “not willingly cede more power to anyone, not to the state, not to General Motors . . . I will hoard my power like a miser, resisting every effort to drain it away from me.”

Increasingly, that is what the intra-party debate on the Right is about: who, ultimately, has the power to determine how we live? Individuals and families? Or corporate political interests masquerading as a free market?

A truly free market would be one that removes the special interest credits, the loopholes, the incentives, the corporate protections. But that is not the market we have, so instead, our free-market discussion actually distills down to one of trade-offs and prioritization.

A more honest discussion would be built around the truths and nuances of that idea. One that seeks to cast the debate as merely a binary choice between capitalism or socialism obscures the essential question: if the goal of a free market is to induce individual liberty and human flourishing, how shall we proceed?

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About Rachel Bovard

Rachel Bovard is senior director of policy at the Conservative Partnership Institute and Senior Advisor to the Internet Accountability Project. Beginning in 2006, she served in both the House and Senate in various roles including as legislative director for Senator Rand Paul (R-Ky.) and policy director for the Senate Steering Committee under the successive chairmanships of Senator Pat Toomey (R-Penn.) and Senator Mike Lee (R-Utah), where she advised Committee members on strategy related to floor procedure and policy matters. In the House, she worked as senior legislative assistant to Congressman Donald Manzullo (R-Il.), and Congressman Ted Poe (R-Texas). She is the former director of policy services for the Heritage Foundation. Follow her on Twitter at @RachelBovard.

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