Mises Wire

Conservatives Are Wrong on Economics. Here’s How to Fix the Problem.

Argentinian president Javier Milei didn’t settle for advocating free market ideals to the cronyist elite attendees at the World Economic Forum. He also delivered a remarkable speech at the Conservative Political Action Conference, reaffirming his commitment to Austrian economics and libertarian theory. He critiqued neoclassical models, quoted economists like Ludwig von Mises and Murray Rothbard, and exposed flaws in socialist economic calculation.

According to their website, the Conservative Political Action Conference is a grassroots organization founded in 1964 that seeks to defend conservative principles. The first conference was in 1974, with the group originating from Ronald Reagan’s campaign. Today, the brand has been exported to other countries, with conferences in places such as Brazil and Hungary.

In addition to the conference’s worldwide expansion, another change has happened in the conservative movement. An ideological shift has occurred in recent years, with the old advocacy of a somewhat limited government domestically and an interventionist foreign policy abroad being increasingly called into question. In one way or another, the ghost of Ronald Reagan—or at least of what he represents—seems to have been buried by part of the new Right.

Other movements such as national conservatism and postliberalism have emerged, with the old fusionism between libertarians and conservatives being increasingly questioned. With these trends in mind, two behaviors have emerged from within the liberty movement: opposition and conciliation. The oppositionists advocate for a complete separation of libertarians and conservatives that are considered too authoritarian and populist. The second group, however, advocates for a closer relationship with conservatives, seeing opportunities for conversations between the new Right and Austrolibertarians based on populist ideology, the confrontation of elites, and the recent noninterventionist foreign policy shift.

In addition to Javier Milei’s speech, two other Austro-libertarians have done important academic work with the conciliatory approach. In The Church and the Market, historian and senior fellow at the Mises Institute Tom Woods promotes a Catholic defense of the free market, demonstrating the possibility of reconciling the Church’s social doctrine with a free economy. Similarly, a recent article by Austrian economist Alex Salter at the Heritage Foundation tried to find a common ground between the new Right and free market ideas. Based on these two works, the main points of convergence and divergence that we can have in relation to conservatives from the point of view of both the Austrian tradition and libertarian theory will be discussed in greater detail. We can still influence conservatives, but time is ticking.

Property as a Key Concept

Despite their criticism of the free market, many conservatives advocate for private property rights to ensure family financial independence. Distributist theorists advocate maintaining ownership of land and small businesses to avoid labor market dependency.

Similar to Human Action’s axioms, Catholic distributism proponents see private property as a means to specific ends, supporting agendas to strengthen it—especially on a small scale—for family well-being and to counter issues like proletarianization and economic dependence, as defined by the economist Wilhelm Röpke.

However, the defense of private property made by many conservative critics of the free market is only partial, with an overly idealistic view of what small businesses and land ownership can do to guarantee the independence of families. First, the view that small family businesses would bring independence to individuals ignores the Austrian concept of entrepreneurship since all entrepreneurial action takes place under uncertainty.

To profit in the market, the entrepreneur depends on his success in making the correct economic calculations, with sales prices—the products of the subjective valuation scales of consumers—being higher than the value paid for the factors of production plus the interest rate, which reflects the intertemporal preferences of individuals. Ultimately, each entrepreneur is dependent on the customers’ valuation of their product, without complete independence.

Another key concept ignored is the division of labor and its benefits for humanity. Although the ideal of some conservatives is for each family to have a property with the possibility of participating in subsistence farming, many individuals do not have the necessary skills for these activities and prefer to enter the labor market where they can—from the income they receive, they can then buy their desired goods and services. In terms of income, the populist argument against current elites and the call for greater independence can find support in criticisms of the current monetary and banking systems, which destroy the purchasing power of ordinary citizens while benefiting a few elites, as discussed in the following section.

Money and Banking

To address the concentration of resources among elites and to tackle economic factors harming family life, the new Right must engage in crucial economic discussions on money creation and the banking system. Fortunately, the Austrian School provides a solid theoretical framework for these debates.

The central banks’ expansionary policies disproportionately benefit the initial recipients of newly created resources, who are mainly well-connected people in elite circles, while workers on fixed salaries suffer the most significant losses through inflation, as economist Richard Cantillon explains. This leads to an increase in income inequality and to an emergence of unnatural elites, who earned their wealth and influence through state intervention instead of value creation, and it exacerbates the challenges faced by families.

Inflation discourages savings and resource accumulation, promoting high-time-preference behaviors detrimental to family life. It also raises living costs and reduces incentives for family formation, contributing to conflicts between couples and higher divorce rates, as observed by economist Jeffery Degner. Since inflation is a product of both central banks and fractional reserve banking, conservatives must not shy away from discussions surrounding the pervasive incentives created by these institutions, advocating for their abolition.

How to Best Attack Elites

In addition to the banking issue, a very common form of maintaining privileges used by elites and state agents is through monopoly rights and regulations. Understood in its original concept, a monopoly can be defined as special rights of protection given to companies or other individuals by the government, reducing the ability for other competitors—which could provide better goods and services—to enter the market.

Regulations both increase market entry costs for new companies and promote destructive effects in the economy, preventing innovation and value creation by new entrepreneurs. As a result of regulations, old elites might continue to prevail in society, with no room for the meritocratic rise of other individuals.

Therefore, the new Right must be careful with the policies it advocates to supposedly eliminate these elites, as these policies can have the opposite effect from the one desired. By calling for a protectionist tariff, for example, right-wing populists can strengthen inefficient economic conglomerates at the expense of possible external competitors that would better serve the needs of the population. A correct agenda for attacking elites must also include an end to all the privileges and subsidies currently granted.

Free Trade

Opposition to free trade is one of the biggest points of divergence between libertarians and market-skeptic conservatives. Conservative thinkers such as Oren Cass of American Compass argue that free trade and globalization have failed to bring the promised benefits, with the destruction of communities and job opportunities in the United States. They also mention issues of security and national competitiveness when dealing with countries such as China.

Even though these conservative thinkers are wrong on this point, however, some libertarians fail to rebut them by only making arguments related to efficiency, thus straw-manning the actual position. As Salter’s article points out, conservatives tend to be more concerned with what measures would benefit families and local communities and less with the efficiency of a given policy. As such, arguments that point only to economic gain, without any response to the moral concerns raised, are bound to fail.

It is important to demonstrate the benefits of free trade for all parties involved, which includes local families and communities. Even with an intellectually honest view of conservatives’ concerns about international trade, it can be demonstrated that increased access to more affordable goods and services, without protective tariffs, fosters wealthier communities and households. Furthermore, we can demonstrate how free trade is beneficial to other current issues that concern the Right today, such as immigration and potential conflicts between countries.

A Final Warning to Libertarians

Among the points listed, it is evident that there is potential for dialogue and alliances with the new Right. Without a conciliatory approach, libertarians and supporters of the Austrian School of economics may miss the opportunity to occupy a power vacuum that could be taken over by other groups like American Compass.

These alliances, however, will only be possible if we are willing to understand conservative values and the reasons why they are important to many people. Just as Alex Salter and Tom Woods did, we need to engage with the arguments of the free-market-critical Right in good faith.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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