Mises Wire

Conservatives Are Increasingly Wrong about Market Freedom

Capitalism creates poverty. Capitalism has stolen our future. Capitalism ravages the planet. Capitalism oppresses us. Capitalism needs to be controlled by government or it will throw most of us into poverty and misery and enrich only the well-placed few.

These are not missives from The Nation or the Daily Worker, although no doubt the writers from those publications would share the sentiments. No, these diatribes against the market economy come from the American Conservative. Of course, it is hardly the only conservative publication that rails against the market system, as First Things can also be counted on to speak out against the evils of an economy based on private property, a price system, and profit and loss. For that matter, before it fell to the grim reaper, the Weekly Standard also raised its voice against markets. Pat Buchanan has been railing against free trade and free markets for years.

So, what is the case that conservatives make against a market system, and how do they justify the kind of government intervention that perhaps in a sober moment they might realize will have the opposite effects of what is allegedly intended? What is the so-called case against the market, and why do some conservatives believe that coercion can create a better economy and better society?

There are numerous issues that we must examine to answer these questions, and the first is this: what exactly is the conservative case against the market? Why are prominent conservatives attacking capitalism?

In a word, change. Capitalism brings change, and bedrock conservatism is anti-change at its core. To better understand that point, we need to go back nearly seventy years to the 1950s, a time that apparently both conservatives and progressives wish to freeze in time. Whether one reads Pat Buchanan or Paul Krugman, the message seems to be similar: this was a golden era for American workers and businesses, a time when the government tightly managed the financial system and key industries were heavily regulated, from transportation to telecommunications.

In a recent article, the American Conservative declared that during the 1950s organized labor “gave capitalism its ballast.” Writes James Pinkerton:

In fact, for a time after World War II, America’s national political leadership was mostly reconciled to strong unions, abuses and all — because the alternative was deemed vastly worse.

In those mid-century years, people remembered what it was like when unions were weak or nonexistent, when unfettered capital was free to grind the face of labor. Such immiseration was seen as a leading cause of the Bolshevik Revolution in Russia — and nobody wanted that to happen here.

Moreover, the Great Depression was an even more recent memory. Thus the Keynesian wisdom held that it was vital to boost workers’ pay so as to keep purchasing power in their hands; they could, after all, be counted on to spend their money and thereby keeping the economy going. In those years, fear of a Depression-ish capital strike was far stronger than fear of a labor strike.

Ballast balances ships to keep them from capsizing at sea. In Pinkerton’s view, organized labor kept the economy “balanced” by keeping “unfettered capital” at bay and preventing it from oppressing labor.

Economically speaking, such a statement only can be called nonsense. As Carl Menger so aptly put it in his 1871 Principles, it was the development of capital goods that raised living standards and provided labor with real wealth increases. Far from grinding the face of labor, it was private capital — and capitalism — that gave them the benefits that people like Pinkerton attribute to the violence of organized labor.

Writing about labor and the 1950s, Pinkerton declares,

strong unions shaped society. Picket lines were not to be crossed, and work rules — detailing which worker could do which job — were strictly enforced (unless there was a payoff).

To anyone much younger than a Baby Boomer, the impact of unionization is hard to comprehend, because over the last four or so decades, we simply haven’t seen incidents such as the one in 1956, when the Teamsters blocked all deliveries to the Waldorf Astoria in Manhattan because of a jurisdictional dispute over the hotel’s barbers.

Still, this Baby Boomer, who grew up near Chicago, well remembers what it was like to live in a strong union town. For instance, meat wasn’t for sale on Sundays. Why not? Because the butchers had work rules to prevent such selling — and that was that. Then there was McCormick Place, the big convention center that was a steady source of scandal-mongering newspaper stories: about union featherbedding, prohibitive labor costs, and the occasional disappeared load of cargo.

Of course, sometimes, union matters got worse than that: incidents of union-related strong-arming, leg breaking—even the occasional murder—were in the news.

Nothing Pinkerton has described can build an economy, and it certainly cannot build wealth. Instead, he has described classic plunder, in which people seeking the opportunity to make a living were beaten, threatened, and even murdered for the “crime” of wanting to do something without the permission of organized labor. And according to the American Conservative, we should want to return to such a regime, which supposedly dominated the 1950s.

Perhaps we should be wary of labeling the 1950s a golden era, even though the theme of the 1950s as Oz reverberates from Paul Krugman to Pat Buchanan to Tucker Carlson. To Krugman, marginal tax rates were 90 percent and organized labor ruled the workplace, which, in his view, preserved a balance in US society that no longer exists. Conservatives like Buchanan see American industry from steel to automobiles to textiles as having been seemingly unchallenged in the world, protected by tariffs double the rates we see today.

That idyllic economic landscape, in Buchanan’s view, disappeared in the 1980s, when Americans began to buy goods, from automobiles to clothing, that were imported. Workers in Third World lands that once sold Americans nothing at all began to undercut the high American wages that both Krugman and Buchanan believe were central to US prosperity. As Buchanan and other conservative critics of the market economy put it, less protectionism and the lure of “slave wages” overseas enabled capitalists to gear their investments “in a race to the bottom.” Such a scenario did not exist in the 1950s. Make cars in Mexico and in South Korea? Not a chance.

Before we call for the return of tax, labor, and trade policies in the decade of poodle skirts, sock hops, and ubiquitous picket lines, however, we should remember that a third of Americans then lived in poverty, much of it abject. Jim Crow laws were on the books, and racial discrimination was embedded in American life in a way that most people today would not be able to comprehend. The government organized key industries, from banking and finance to all forms of transportation and telecommunications, into regulated cartels that forced Americans to pay higher prices for just about everything. If you wanted economic opportunity, you usually needed a union card or a connection to government regulators and politicians.

Yet, there is an appeal to the nostalgia of the company towns and the seeming stability of the working-class towns. I lived in such a place in southeast Pennsylvania from the mid-1950s to mid-1960s, until I was almost eleven years old, and I remember knowing people who worked at places like US Steel, the Sun Oil refinery, Ford Motor Company, Baldwin Locomotive Works, and Sun Shipbuilding. Ours was a middle-class town, and it was the rare worker that was not a member of a labor union.

The industries that once buttressed my former hometown no longer exist, from the oil refinery two miles from my house to the other manufacturing facilities that employed my neighbors. They are shuttered, many of the buildings and fixtures sold for scrap or having been transformed into large, empty lots. This is Rust Belt scenery and the ruin porn is repeated on the Eastern Seaboard and in towns in Ohio, Pennsylvania, Michigan, and elsewhere. Many old working-class towns once held together by a single manufacturing plant that has closed are left to struggle, and some places are transformed into what some have called the “Heroin Belt.”

Conservative critics tend to agree with politicians like Bernie Sanders and Elizabeth Warren about the cause of this economic and social decline, and they increasingly are willing to accept the “solutions” these politicians are demanding, from high tax rates on businesses and individuals to both internal and external protection. And like Sanders and Warren, these conservative market critics blame “corporate greed” for the changes that new investment patterns bring to once prosperous manufacturing communities.

Like those on the Left, the anticapitalist conservatives want to preserve those places that we remember from years ago. What they fail to comprehend is that demanding that government hold back changes in capitalization along and in the methods by which firms make things, they also are demanding that government restrict changes in everything else. To put it another way, we cannot preserve the 1950s manufacturing economy and the mill village without restricting changes in the quality of medical care we receive, in telecommunications, and in transportation.

The old socialist countries provide an insightful lesson regarding the “freezing in time” syndrome. People who have visited places like present-day Cuba or spent time behind the Iron Curtain when the USSR and the eastern European satellites were in existence note that in many ways going there was like entering a time warp. However, this was not the experience one has when visiting an “old town” section of a modern city to see examples of lovely architecture from the past.

Instead, although the old architecture might have dominated in, say, Havana or Prague before the 1990s, everything looked old and run down. Yes, there was evidence of some of the glory of the old days, but for the most part, these places would evince grime, disrepair, and the lack of hope. If one does not want change, then one should go to Havana, where even the 1956 Chevys still are on the road.

For that matter, one does not need to bring back memories of communism to find examples of how the lack of change and development because of government restrictions can have negative effects. Look at American railroads before and after deregulation. As Milton Friedman pointed out in Free to Choose, the US rail system pre-1980 looked like something from the 1950s, and he contrasted the railroads with the US automobile industry, which was already coming out with new models every year.

Since the Jimmy Carter administration ended nearly a century of federal regulation of the railroad industry in 1980, American railroads have become a major factor in a stronger US economy. Michael Grunwald wrote in Time Magazine in 2012:

It’s not just that they are self-sufficient and fuel-efficient, employ 175,000 workers and have poured $500 billion into their trains, tracks and terminals since 1980. They are also quite literally the engines of our economy. America’s passenger rail is a global joke, but our freight rail is the envy of the world, carrying over 40% of our intercity cargo. Trains carry much less of Europe’s freight, which is why trucks clog Europe’s highways. And America’s rail-shipping rates are the world’s lowest, reducing the cost of doing business in the U.S.; they’ve fallen 45% in real dollars since the industry was deregulated three decades ago.

One only can imagine the objections we would hear today from TAC and conservative journalists such as Tucker Carlson if such a deregulatory proposal was to be presented today. “What about economic concentration?” “The railroads will jack up prices!” “Good service will disappear!” “What about safety?” “Won’t there be more derailments and rail accidents?” And so on.

The conservative case against free markets is based on the belief that if change disrupts the status quo in any way, or if companies impose cost reductions that result in a shifting of employment — or even some layoffs — then government should step in and take control. Now, I should add that the conservatives are not advocating outright state ownership or control — or at least that is what they are saying.

Of course, the notion that government will just regulate a little bit and only restrict a few things is fantasy. Likewise, anyone who believes that government regulation will reduce alleged economic concentration does not know the history of regulation. Before the late 1970s and early 1980s, the government essentially organized several industries into regulatory cartels, including passenger airlines, trucking, railroads, banking, and telecommunications. One might recall the numerous railroad bankruptcies that resulted in the formation of Conrail, which was nothing more than a government rail firm that covered the East Coast.

Telecommunications? The only game in town was AT&T and phone service was primitive compared to what it would become only a decade after the end the old regulatory regime. A relative free market transformed the rail industry, and trucking also has vastly increased its hauls. These industries are much more competitive now that government does not control rates and routes.

Since 1980, American living standards have increased in ways that no one then could have predicted. Free markets have played a major role, and one would think that conservatives would appreciate that fact. Instead, they present a picture of wise and paternalistic government that somehow can provide prosperity but still preserve our imaginary Norman Rockwell world.

Image Source: Carlson
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
What is the Mises Institute?

The Mises Institute is a non-profit organization that exists to promote teaching and research in the Austrian School of economics, individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard. 

Non-political, non-partisan, and non-PC, we advocate a radical shift in the intellectual climate, away from statism and toward a private property order. We believe that our foundational ideas are of permanent value, and oppose all efforts at compromise, sellout, and amalgamation of these ideas with fashionable political, cultural, and social doctrines inimical to their spirit.

Become a Member
Mises Institute