“To me, capitalism is irredeemable,” Representative Alexandria Ocasio-Cortez declared amid the lavish surroundings of the 2019 South by Southwest conference. The present state of affairs in America is “garbage,” she added, because “if you don’t have a job, you are left to die.”
These are not the ravings of a beret-clad beatnik waxing nostalgic about the unappreciated virtues of Stalinism from the basement of a West Village dive bar. This is a member of Congress denouncing the free market from the stage of a fashion-forward conference sponsored by America’s wealthiest corporations and attended by its most successful influencers.
Ocasio-Cortez has become the standard-bearer of an ascendant wave of populist progressives who take a dim view of the marketplace. Statements like these illustrate why. Following her successful efforts to force Amazon to scrap its plan to headquarter East Coast operations with tens of thousands of jobs near her district, Ocasio-Cortez told us how she thinks the world works. “We do not have to settle for scraps,” she insisted. “It’s not just about any job,” she contended. What we need are “jobs that contribute to communities.”
She, and you, might be surprised to learn how many allies she has on the populist right. “Market capitalism is not a religion,” Fox News Channel’s Tucker Carlson declared in a viral riff in January 2019. “Any economic system that weakens and destroys families isn’t worth having.” Once a fellow at the libertarian Cato Institute, Carlson now finds more to love in progressive prescriptions for government-managed growth than in the untrammeled marketplace. Carlson now makes common cause with Senators Bernie Sanders and Elizabeth Warren even as he derides Senator Mitt Romney as a “mercenary” owing to the years Romney spent in venture capital.
These two popular figures may seem like polar political opposites, but they have settled on a consensus view that markets are undesirable or even dangerous. They are the leading indicators of an important intellectual and ideological tendency. Consider the views of Harvard Law School professor Adrian Vermeule, a self-described reactionary. “Liberal society celebrates toleration, diversity, and free inquiry, but in practice it features a spreading social, cultural, and ideological conformism,” Vermuele writes. For him, capitalism and socialism are virtually indistinguishable “variants of liberalism, differing over means rather than ends.” A manifesto recently authored by the writers at First Things exemplifies this intellectual-populist attack on the market, denouncing as it does a “dead consensus” typified by “the soulless society of individual affluence.”
In this, First Things is joining with American labor organizations. The AFL-CIO, having long forgotten the exertions its leaders made in the mid-20th century to extirpate Marxists from its ranks, now tweets images of guillotines straight out of Pravda to protest objectionable labor practices, and it posts “anti-capitalist” educational videos that supposedly capture the all-consuming “conflict between workers and the owners of society.”
These strange bedfellows share an implicit belief that the free market is responsible for incredible suffering, systematic oppression, and unscrupulous profiteering that are literally putting the existence of the human species at risk. For conservatives especially, the market is held to be the cause of crises such as substance abuse and suicide, and it is seen as contributing to the onrush of a decadent cultural liberalism that has accelerated the displacement and alienation of the American working class and its moral collapse.
Capitalism and markets have proved to be alluring targets, as they have been in the past—one-stop-shopping buzzwords that can be held responsible for society’s ills. In the 18th century, they were the cause of dark satanic mills that destroyed the blissful communitarianism of the village commons. In the 19th century, they were the destroyers of American regional differentiation through the ruthless introduction of national transport, from boats to trains and then automobiles. In the 20th century, they created the profiteering that egged countries into ruinous massive wars that left the world a ruin but made many unassailably rich.
The new generation of anti-marketeers appears wedded to a notion that there is something out there that must be better than what we have, that the global commercial culture can be and should be replaced. There must be other and fairer methods for structuring commerce that we would prefer if the powers that be would allow it.
This is ideologically blinkered ignorance, and we shouldn’t be afraid to call it so. Human civilization has attempted every form of social organization ever conceived. Free-market capitalism enjoys its present status because history has demonstrated it is objectively superior to its competitors. Capitalism’s critics have either forgotten the lessons of history or never learned them in the first place.
Privation and want entered a period of radical decline after the market revolutions of the late 20th century. Climate change—a source of existential dread for many younger Americans—is ameliorated by market forces as much or more than it is exacerbated by them. Organizing a society around competitive impulses does not inevitably lead to atomization and social isolation. In fact, progressive alternatives to competition that are predicated on government intervention in economic life are likely to strain communitarian bonds. Families, churches, civic associations, activist organizations, schools, community centers—the sources of human fulfilment and belonging that exist independent of economic life—are crowded out of the public square by the ever-expanding state.
Capitalism’s record deserves to be defended, and it’s a good story to tell. The critics of the marketplace have valid concerns about the effect that commerce has on the environment, social equality, community bonds, and public and spiritual health. But not only are the alternatives to markets undesirable, these concerns are in many ways already being addressed by market forces.
The public is in desperate need of an education on the positive effects the marketplace has had on societal evolution and why it serves as the foundation upon which modern civilization has flourished. It underwent such an education—in the negative—50 years ago.
‘I am today ordering a freeze on all prices and wages throughout the United States,” said President Richard Nixon during a nationally televised address in the summer of 1971. Circumstances were urgent. Inflation was rising steadily, and so was unemployment. Labor unions and the sprawling corporate entities that catered to them were both driving up wages and prices. Most critically, the dollar was facing mounting pressure as foreign nations began to demand to see their dollar holdings redeemed for gold. Nixon’s response was to abandon his dedication to markets for 90 days, after which a series of commissions would artificially set wages and prices until after the 1972 elections. The press loved it, as did the stock market. Nixon was reelected in a landslide.
But the price-control experiment failed on its own terms. Unemployment did not decline. Inflation was not “whipped.” Nixon’s answer to the failure of price and wage controls was more price and wage controls, and, in June 1973, he re-imposed a freeze. The political dysfunction that resulted from this policy was staggering. “Ranchers stopped shipping their cattle to the market, farmers drowned their chickens, and consumers emptied the shelves of supermarkets,” wrote Daniel Yergin and Joseph Stanislaw in The Commanding Heights: The Battle for the World Economy. Though much of the system was dismantled by 1974—well beyond the original 90-day time frame—some controls persisted, among them tiered and arbitrary levels on the cost of petroleum products and natural gas. Those would not be entirely abolished until January 1981, during Ronald Reagan’s first week in office.
The downsides associated with governmental interference in the market are well-known because that interference was once far more common than it is today and so its inadvertently damaging effects were relatively easy to measure. In the 1960s and ’70s, proto-socialist economic structures were viewed, from the center right to the far left, as the best way to achieve rapid industrial development. Regulatory capitalism, publicly owned enterprises, and Keynesian economic prescriptions were regarded as not just the preferred but the only comprehensive way to guarantee growth without disrupting the social fabric.
And they failed to deliver.
In the 1980s and 1990s, this old order was swept away in favor of a renewed commitment to competition. It was a paradigmatic shift that ushered in revolutionary changes. The democratic political revolutions that accompanied this philosophical transformation were sometimes bloody, sometimes traumatic, and always tumultuous. Some of these revolutions succeeded in overcoming tyranny, others did not. But everywhere—from Bolivia to Beijing—the market emerged triumphant. Indeed, the market revolution has done what mixed public-private economies never could: all but eliminate extreme poverty.
In 1981, 42 percent of the world lived in extreme poverty, defined as living on about $1.90 per day. As the developing world shed its commitment to protectionism, wages began to rise and political instability declined. The marketplace created a commodity out of what used to be the Third World, redubbed the “emerging market,” leading to previously unseen rates of investment that have survived all manner of economic shocks and corrections. Deaths associated with global conflict and warfare have decreased to proportionate rates almost unseen in human history. It is no coincidence that this condition followed the re-creation of the global economy after the collapse of the Soviet Union in 1991, the first time such a thing had existed since the outbreak of World War I in 1914.
This confluence of events has delivered previously unknown levels of economic security. Between 1981 and 2008, more than 700 million people escaped crippling poverty even as the global population increased by 48 percent. In measures of both quality of life and life-expectancy rates, the world has experienced an across-the-board increase, but the positive trends are especially pronounced in the developing world. It is no coincidence that this revolution in human well-being coincided with the implementation of market-oriented reforms in countries such as China and India.
Beginning in 1978, Deng Xiaoping began the process of introducing competition into the moribund Maoist Chinese economy. The People’s Republic abandoned central planning, broke down collective farms, procured foreign-trade deals, reduced tariffs, and sold off state-owned industry. In 1981, the World Bank estimated that 88 percent of Chinese people lived in extreme poverty. By 2015, only 0.7 percent of the country was mired in that condition.
India’s “License Raj,” the Byzantine economic structure designed to preserve social cohesion by making enterprise and innovation an impractical proposition, seemed an intractable feature of the economic life of the subcontinent until the last decade of the 20th century. Nehruvian socialism and the self-sufficiency preached by Mahatma Gandhi were akin to a secular state religion. Its dissolution liberated the Indian economy. Monopolies and restrictive trade practices were curtailed or abolished. Industrial licensing was radically reformed. Prices were freed from controls while personal income-tax rates were held in check. Since 1990, 170 million Indians have emerged from extreme poverty. Today, fewer than 3 percent of India’s 1.3 billion people endure the kind of economic hardships that were once so common.
Economic downturns associated with the business cycle can slow this trend, but so, too, can corruption and authoritarianism. “The biggest poverty-reduction measure of all is liberalizing markets to let poor people get richer,” read a 2013 editorial in the Economist. “That means freeing trade between countries (Africa is still cruelly punished by tariffs) and within them (China’s real great leap forward occurred because it allowed private business to grow). Both India and Africa are crowded with monopolies and restrictive practices.” The competitive marketplace does not encourage intractable structural inequalities. The interests, concerns, and governments that support bad practices most certainly do.
To some, this nearly miraculous reduction in global poverty as a result of capitalist enterprise is nothing to celebrate. It is considered the benign symptom of a latent disease, the onset of which is just around the corner. They call this disease “late capitalism.”
“Late capitalism” is to blame for everything from the consumption patterns of the hugely wealthy to interclass conflict. Vice News has identified it by citing lengthening work weeks and the commodification of blood donations. Academicians, polemicists, and prognosticators see “late capitalism” in our perceptions of sex, interpersonal relations, and entertainment. For Truthout’s Kelly Hayes, late capitalism is the “global consolidation of resources” that will one day result in “mass suffering followed by mass extinction.”
We can see in this assault a perverse desire among those who are benefiting from it—a hunger to see the most effective anti-poverty program in history destroy itself. In the past 40 years, America’s “late capitalist” economy tripled in real terms. Real wages have grown steadily, albeit slowly, thanks to low rates of inflation. The invisible beneficiaries of the modern global marketplace vastly outnumber those who are detached from it, but individual tales of woe focus the mind and the heart more than bloodless metrics and antiseptic statistics do.
Mikhail Gorbachev, the last general secretary of the Communist Party of the Soviet Union, is an environmentalist now.
In 2010, he received the German Environmental Award for his “admirable passion for a global ecological Perestroika.” The unrepentant Communist even wrote an environmentalist manifesto in which he claims to have undergone a great awakening at the end of the Cold War. “It became clear that growth was occurring only at massive cost to the environment,” Gorbachev wrote. In this way, he has recast the implosion of the Soviet state, an outcome he resisted, as an act of altruistic self-sacrifice for the sake of the planet.
Restyling himself a prophet of the green movement has had some instrumental utility for Gorbachev and his fellow travelers. The Communist movement he once led and the environmentalist one he seeks to commandeer share a common faith in economic central planning. These two divergent movements occasionally converge upon the conceit that the market economy is the source of the threat posed by climate change. Therefore, they reason, curbing markets is the only way to avoid catastrophe.
“I think what we have laid out here is a very clear moral problem,” Representative Ocasio-Cortez said in April 2019. “If we fail to act or if we delay in acting, we will have blood on our hands.” That is why she advocates the Green New Deal, which fetishizes the public sector. The proposal claims that “incentivizing the private sector” to mitigate the threat posed by ecological damage and climate change “doesn’t work.” Ocasio-Cortez and her supporters are wrong. It’s the marketplace that is addressing environmental concerns in ways that are far more comprehensive and require fewer moral compromises than the anti-capitalist proposals they champion.
In 2017, U.S. per capita carbon emissions declined for a third consecutive year, by 2.7 percent, to reach a 67-year low. They rose slightly in 2018 owing to increased economic activity, but the overall decline in emissions over a little more than a decade in America is staggering—a 28 percent decrease since 2005 despite economic growth that took overall GDP from $13 trillion to $20 trillion. Carbon dioxide emissions from the transportation sector have decreased even as Americans drive more and fly less.
Federal fuel-efficiency mandates for planes, cars, and buses have put downward pressure on emissions but so, too, have advancements in aerodynamics, weight reduction, and transmissions that accommodate consumer preference and competition. All-electric vehicle technology has all but crowded out hybrid cars from the market, despite the billions in federal subsidies dedicated to hybrids. Hydraulic fracturing technology, not federal mandates, has made cleaner-burning natural gas (a “bridge fuel” to a more sustainable future) a cost-effective alternative to dirtier fossil fuels. And because natural gas emits far less carbon dioxide than traditional fossil fuels do, 2017 found power-plant emissions falling to their lowest point since 1985. Americans are using less electricity even as the population grows and the economy expands due to increased efficiency. That’s thanks to a variety of pressures, ranging from market forces to voluntary governmental incentives for private producers such as ENERGY STAR, a program the Green New Dealers dismiss as a half measure.
By contrast, the mixed and command economies of the 20th century (and those few that persist today) invariably place a premium on social stability, not the environment. As a result, countries hostile to markets have been responsible for some of the worst environmental disasters in living memory. Russia has some of the worst air pollution on earth. Even today, more than a generation since the collapse of the Soviet Union, only 15 percent of Russian city dwellers breathe clean air. Soviet agriculture policies carelessly eroded topsoil. Pesticides and unsafe fertilizers were deployed with reckless abandon. Coal-burning power-generation facilities darkened the skies. The Aral Sea is all but gone—diverted into oblivion by Stalinist irrigation projects. That displaced more people and disrupted more environments than any previously studied environmental disaster (more even than the nuclear meltdown at Chernobyl).
On the worst days, the air in China is unbreathable, the water defiled, and the soil made toxic by unsafe levels of heavy metals. Unsustainable development, resource consumption, and the dumping and venting of pollutants all occur despite the government’s environmental regulations. Public officials look the other way while the workers, activists, and farmers who dare protest these conditions are arrested, jailed, and beaten.
Unscrupulous private enterprise, under-regulated industries, and simple accidents do yield catastrophic environmental disasters in market-oriented economies. But the systemic sort of environmental degradation that climate activists attribute to 21st-century industry is more often the product of a planned economy’s pursuit of rapid growth at the expense of everything else.
The demand for improved environmental policing by the state and the support of a greener economy is directly proportional to the market’s ability to support the demand for these programs. “We find no evidence that environmental quality deteriorates steadily with economic growth”; that was the conclusion of Gene Grossman and Alan Krueger’s influential 1994 study on economic activity and environmentalism. “Rather, for most indicators, economic growth brings an initial phase of deterioration followed by a subsequent phase of improvement.” In plainer terms: You get the environment you can afford.
Wealthier and freer societies have better environmental track records, in part, because those societies have more diverse power centers with varying priorities. Developing nations with mixed or controlled economies do not, now or ever, sacrifice growth to preserve their local ecologies. The notion that transforming wealthy economies into centrally planned ones will yield better environmental conditions is an article of faith divorced from the historical record.
A popular refrain among capitalism’s critics is that “market fundamentalists” envision almost no role for the public sector in society. That may be so among a few radical Randian theorists, but it isn’t the case for almost any serious thinker on the subject. The public sector has an important role in ensuring that the economic playing field encourages competition. But like any strong medicine, too much of it is a poison.
While the properly regulated marketplace is essential for an economy to function, the core mission of a regulatory enterprise must be to encourage and preserve competitiveness. The results of excessive regulation are often worse than the problems that regulation seeks to remedy. In the real world, regulators and their institutions are prone to “capture” by the very firms on which they exercise oversight. Special interests and lobbying groups, which are closer to the day-to-day operations of individual economic sectors than their regulators, can hijack the process and arrange it so that regulatory mechanisms entrench their advantages over their competitors. Regulatory structures can discourage competition and thereby keep prices from declining. That doesn’t provide many benefits for consumers, but you can see how firms that were “regulated” in this way wouldn’t mind an artificial ballast on the prices of their products.
Often, the power these agencies acquire for themselves becomes an end in itself. That power allows regulatory agencies to circumvent the legislative process and effect social and political change without being directly accountable to voters. That is, in part, why the “disinterested regulator”—a necessary figure in any understanding that favors government involvement in the private economy—is a theory, not a job description. That kind of power attracts very interested parties indeed, and it creates incentives to misuse the regulatory process. Ultimately, even the government’s power to break up trusts—which is necessary and valuable when used judiciously—is undermined by the increasingly globalized economy, in which competition is almost impossible to suffocate through monopolistic mechanisms.
Above all, government should use its great powers sparingly. When it uses its regulatory power and its ability to provide incentives, terrible things can happen in the pursuit of the good. In the 1990s, the well-meaning desire to increase the number of stakeholders in the American social compact resulted in a government-wide effort to encourage homeownership through increased access to affordable loans. The federal government encouraged banks to provide mortgages to borrowers who could not otherwise afford them, so lending institutions therefore saw little risk and the opportunity to make a substantial profit. Some of these loans were transferred to semi-governmental entities such as Fannie Mae and Freddie Mac. Others were sold off to larger investment banks to be bundled into “mortgage-backed securities,” which were in turn sold off to investors after they had been approved as safe investments by government-backed credit-ratings agencies. These securities intermingled bad mortgages with other investment opportunities. They, in turn, were purchased by large institutions and pension funds. Eventually, these mortgages became so widely disseminated that they contaminated vast swaths of the investment landscape.
Debt piled up, outpacing equity. And when the prices of housing began to decline as the market cooled, so, too, did the value of mortgage-backed securities. This hurt the financial institutions, pension funds, and investors that held them. And thus, a cascading chain of failures became a panic that took the whole economy with it. Only a series of bailouts helped staunch the bleeding, but those bailouts sparked a wave of populist unrest that in many ways has not yet subsided. The financial meltdown was not a “market failure.” It was not the result of market fundamentalism. It was caused by economic tinkering made possible by the federal government.
As the urgent crisis of material want arising from the 2008 financial meltdown dissipated, the conservative mind turned its focus from the demands of the body to the desires of the soul. Conservative critiques of the market arise from a philosophical outlook that’s distinct from their progressive counterparts, but they have apparently arrived at the same conclusions. They argue that market forces are creating a borderless world in which domestic wages decline to compete with the global supply of labor, which is well below a reasonable standard for daily life in the United States. They say the market creates incentives to replace skilled workers with machines, tearing apart communities and sowing social discord in the process. They insist that a society that privileges commercial activity above all else causes cohesive communities to disintegrate.
Markets create winners and losers, as every system of economic organization does. People who are displaced or underserved by the competitive environment deserve sympathy. They are the living, breathing counterpoint to the notion that a market system is uniquely superior to its alternatives. But there is no society in which all evils are extirpated and every social malady remedied. There will always be trade-offs. Every society of appreciable size is economically stratified—even (perhaps especially) those societies that are officially classless. The task before anyone who believes we should live in a society that is as just as it is possible for a society to be is not to mourn the existence of those strata but to ensure that they are permeable.
The question before us is, as ever, what course of action delivers the best outcomes for the most people. Centuries of experimentation have provided us with the answer: competition and markets. Conservative thought, which has always been comfortable with contradictions, has begun to fall prey to the unrealistic romanticism that traditionally typifies the idealistic left. Attempts to impose economic equality on a society do not end up maximizing individual advantage but universalizing hardship.
Markets are a force of nature; they can be harnessed, guided, and managed, but they cannot be suppressed. Those who have turned against the good of markets in pursuit of the idyllic perfection of a homogenized economic and political culture present a direct threat to the unprecedented peace and prosperity that followed the Cold War. Both the right and the left have diagnosed today’s greatest threats to social cohesion correctly, and some of those threats are rooted in the workings of the incalculably complex market economy. Efforts ranging from Ocasio-Cortez’s Green New Deal to Tucker Carlson’s monologues to the assault by First Things intellectuals on “the dead consensus” that are designed to undercut, subvert, or morally discredit the market in favor of something else—they know not what—will prove to be as inefficient, ineffective, and morally corrupting as they ever were.