Extras: Samuel Gregg on The Next American Economy

That election made it very clear that many assumptions about things like trade or industrial policy that seemed to have achieved a type of orthodoxy on the political right, but also on parts of the political left, were no longer orthodoxies…from there we saw a rising skepticism to the power of markets across the political spectrum.

That implies a type of top-down sectors of the economy, trusting the federal government to do things in the way they say they’re going to do them, accepting significant diminution of economic and personal liberty. There’s a significant part of both the right and the left that want America to go down this path. If you look at some of their economic ideas and preferred policies, despite the fact that they disagree on lots of things, they’re getting close to being on the same page when it comes to their economic vision of the future.

This was portrayed as a failure of financial markets, a failure of the market economy, and a failure of capitalism. A lot of people have grown up in an era where this skepticism and negativity about markets has only gotten worse…and the Western world has turned back to the state.

We do have state capitalism. We have lots of industrial policy and protectionism. There are many people who look to the federal government to shape the economy to benefit what they see as groups that have lost out in the globalization period that we underwent from the 1980’s up until very recently.

It means we’re going to ignore comparative advantage. It means pretending there aren’t tradeoffs. It means that entrepreneurial instincts get shifted away from trying to produce new goods and services to trying to extract wealth from people; what we call rent seeking. All of those things taken together lend themselves to deeply unhealthy economic arrangements, and the more we dig ourselves into it, the harder it becomes to dig ourselves out. There are so many established interests now that have no interest in changing the state capitalist status quo that’s becoming more and more of an American reality today.

A lot of people who describe themselves as classical liberals or limited government conservatives were struggling to provide answers, because the answers that were required needed to go beyond economics. Many of the doubts that were driving this skepticism about markets and limited government were being driven by economic dissatisfaction, cultural dissatisfaction, certain elements of foreign policy, concerns that parts of America were being neglected and had not benefited from globalization.

I think a lot of free marketers were reluctant to engage in the cultural issues that particularly many conservatives were getting worked up about, sometimes with good reason to be worked up about. Many free marketers adopted the position that they had nothing to say about these things, and I think they had many good things to say about many of these questions that would have disarmed the conservative critiques about the workings of markets.

Another thing we need to talk about when it comes to things like rule of law is why it isn’t just lending itself to more efficient markets, but why rule of law reflects the higher lights of who we are as human beings. These rules reflect commitments to certain goods that are always good for human beings…or when it comes to trade questions. Yes, it’s materially beneficial, but we should also see this as extending the civilization of natural liberty…we need to create the sense that markets and good economic policy forms part of a wider civilizational endeavor.